Genworth Financial's (GNW) second quarter operating loss wider than the Zacks Consensus Estimate loss. A substantially higher year-over-year loss at the U.S. Mortgage Insurance segment, partially offset by better results at Retirement & Protection and at International, resulted in the company's soft performance. We expect mortgage
insurance business to remain pressured.
Additionally, improvements in its other business lines are expected to be slow, given the economy's sluggish recovery. Our six-month target price of $5.25 equates to 10.5x our earnings estimate for 2011, implies a negative return of about 9.8% over that period. This is consistent with our Underperform recommendation on the shares.
Additionally, the quantitative Zacks Rank for Genworth is currently #5 (Strong Sell), indicating downward pressure on the shares over the near term. Short interest is currently 1.2 days.
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