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AXIS Capital (AXS) Stock Gains 27% YTD: Will the Rally Last?

Shares of AXIS Capital Holdings Limited AXS have rallied 26.7% year to date, compared with the industry’s increase of 15.5%, the Finance sector’s rise of 5.8% and the Zacks S&P 500 composite’s gain of 11.5%. With a market capitalization of $5.9 billion, the average volume of shares traded in the last three months was 0.6 million.

A compelling and diversified product portfolio, underwriting excellence, digital capabilities and a solid capital position continue to drive this Zacks Rank #3 (Hold) insurer. Axis Capital has a decent record of delivering an earnings surprise in the last six quarters. Earnings have grown 82.7% in the past five years, better than the industry average of 9.6%.

AXS’s trailing 12-month return on equity is 19.1%, ahead of the industry average of 7.8%. Return on equity, a profitability measure, reflects how effectively a company is utilizing its shareholders.

Also, return on invested capital (ROIC) has been increasing over the last few quarters amid capital investment made over the same time frame. This reflects the company’s efficiency in utilizing funds to generate income. The company’s ROIC in the trailing 12 months was 11.1%, better than the industry average of 5.9%.

This leading specialty insurer and global reinsurer, aiming for leadership in specialty risks, has a VGM Score  of B. This helps to identify stocks with the most attractive value, growth and momentum.

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Zacks Investment Research

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Can the Stock Retain the Momentum?

AXIS Capital envisions being a leading specialty underwriter and has intensified its focus on specialty lines. The insurer continues to invest in growth areas, including wholesale insurance and lower middle markets. Exiting the volatile catastrophe and property reinsurance space and reducing risk exposure while concentrating on accident and health, casualty, credit and surety, and specialty reinsurance lines should help it achieve its goal.

Its insurance business should benefit from a diversified portfolio of global specialty business, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. The lines of business, on average, witnessed a double-digit rate increase.

Axis Capital has an impressive history of distributing wealth to shareholders via dividends and share buybacks. While the insurer prioritizes investing in growth initiatives that ramp up specialty businesses, it has also hiked its dividend for 18 consecutive years. Its dividend yield is currently 2.5%, way above the industry average of 0.3%. The insurer boasts one of the highest dividend yields among its peers. This apart, AXS also has a $36 million share buyback remaining under its authorization for this year.

The Zacks Consensus Estimate for 2024 earnings is pegged at $10.33, indicating an increase of 4.9% on 4.5% higher revenues of $6 billion. The consensus estimate for 2025 earnings is pegged at $11.03, indicating an increase of 6.8% on 9% higher revenues of $6.5 billion.  The expected long-term earnings growth rate is pegged at 5%.

Stocks to Consider  

Some top-ranked stocks from the insurance space are The Allstate Corporation ALL, Arch Capital Group Ltd ACGL and RLI Corp RLI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Allstate delivered a four-quarter average earnings surprise of 41.88%. The stock has gained 21.6% year to date. The Zacks Consensus Estimate for ALL’s 2024 and 2025 earnings indicates a year-over-year increase of 1,479% and 13.8%, respectively.  

Arch Capital delivered a four-quarter average earnings surprise of 28.41%. The stock has gained 31.9% year to date. The Zacks Consensus Estimate for ACGL’s 2024 and 2025 earnings indicates a year-over-year increase of 0.7% and 5.8%, respectively.  

RLI delivered a four-quarter average earnings surprise of 132.49%. The stock has gained 9.6% year to date. The Zacks Consensus Estimate for RLI’s 2024 and 2025 earnings indicates a year-over-year increase of 18% and 2.6%, respectively.


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