Yahoo Finance Should Arch Capital (ACGL) Be in Your Kitty Before Q1 Earnings?
Arch Capital Group Ltd. ACGL is set to report first-quarter 2024 earnings on Apr 29, after market close. The Zacks Consensus Estimate for first-quarter earnings per share is pegged at $1.96 on revenues of $3.8 billion. The top- and bottom-line estimates imply year-over-year improvements of 19.1% and 22%, respectively.
Per our proven model, stocks with a combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) are likely to beat on earnings. At present, Arch Capital has an Earnings ESP of -1.21%% and a Zacks Rank of 3. Hence, it is presumed that Arch Capital is unlikely to beat estimates this earnings season.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Price Performance
Year to date, shares of Arch Capital have rallied 25.5% compared with the industry’s 15.1% increase, the Finance sector's 2.1% rise and the Zacks S&P 500 composite’s increase of 6.6%.
Arch Capital Group Ltd. Price and EPS Surprise
Arch Capital Group Ltd. price-eps-surprise | Arch Capital Group Ltd. Quote
Factors Acting in Favor
New business opportunities, a rise in existing accounts and growth in Australian single-premium mortgage insurance are likely to have benefited Arch Capital’s premiums. Continued rate increase adds to the upside. Per a report in Insurance Journal, global commercial insurance rates improved by 1% on average in the first quarter of 2024, as per Marsh. The property, marine, construction, and national accounts business lines are likely to have recorded a strong performance.
With operations spread across geographies, a compelling product portfolio provides meaningful diversification and earnings stability to ACGL.
Increasing cash flows from underwriting has been expanding investing asset base. This coupled with improved interest rate environment has been aiding net investment income.
Utilization of cash flow to repurchase shares and deployment of capital for reinvestment in the business, as well as to lower debt level, are likely to have had a positive impact on its performance.
Headwinds
The mortgage industry has been facing a decline in mortgage originations. Though a stable insurance in-force portfolio ensuring high persistency is likely to have helped the company navigate the macro headwind, yet concerns remain.
Also, ACGL has been witnessing rising expenses owing to higher losses and loss adjustment expenses and operating expenses, among other. This in turn has been weighing on margin expansion. We expect expenses to increase 19.3% in the first quarter of 2024, with net margin contracting 30 basis points.
Being an insurer, ACGL is exposed to catastrophe losses, which weigh on underwriting profitability. Gallagher Re’s National Catastrophe and Climate Report estimates global insured losses from natural catastrophes at $20 billion in the first quarter of 2024. We estimate combined ratio to deteriorate 220 basis points in the first quarter of 2024.
Bottom Line
Despite the headwinds, it is advisable to hold on to this stock over the long term, given its positive fundamentals, growth in existing accounts and a solid capital position supporting capital deployment and wealth distribution.
Stocks to Consider
Here are three insurance stocks you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:
Kinsale Capital Group KNSL has an Earnings ESP of +4.35% and a Zacks Rank #2 at present. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at $3.33, indicating a year-over-year increase of 36.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
KNSL’s earnings beat estimates in each of the last four reported quarters.
Kemper Corporation KMPR has an Earnings ESP of +4.60% and a Zacks Rank of 1. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at 87 cents, indicating an increase of 185.3% from the year-ago reported figure.
KMPR earnings beat estimates in each of the last four reported quarters.
Skyward Specialty SKWD has an Earnings ESP of +7.99% and a Zacks Rank of 2. The Zacks Consensus Estimate for first-quarter 2024 earnings stands at 66 cents, indicating an increase of 57.1% from the year-ago reported figure.
SKWD earnings beat estimates in each of the last four reported quarters.
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Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Kemper Corporation (KMPR) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
Skyward Specialty Insurance Group, Inc. (SKWD) : Free Stock Analysis Report
