On Nov 19, Zacks Investment Research downgraded Genworth Financial, Inc. (GNW) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Genworth Financial has witnessed downward estimate revisions following disappointing third-quarter results. Given its expected negative earnings growth rates for the upcoming quarters, it has more downside left.
Genworth Financial incurred operating loss of 64 cents per share, missing the Zacks Consensus Estimate of 16 cents earnings per share and compared unfavorably with 28 cents earned in the year-ago quarter. Net loss of $1.70 per share plunged from 22 cents earned in the year-ago quarter.
The results suffered due to an increase in claim reserve following the completion of the review of long-term insurance claim reserve and goodwill impairment.
Both Life and Mortgage Insurance segments witnessed weak results. The U.S. Life Insurance segment incurred loss due to poor results in long-term care insurance and a soft performing life insurance business. While loss at U.S. Mortgage Insurance narrowed, lower profit at International Mortgage Insurance resulted in overall mortgage insurance softness.
In addition, total benefits and expenses increased 63% year over year to $3.8 billion due to higher benefits and other changes in policy reserves and goodwill impairment recorded in the quarter.
Following a dismal third quarter, the Zacks Consensus Estimate for 2014 and 2015 saw a downslide as most of the estimates were lowered in the last 30 days. It moved down 80% to 24 cents (as all 6 estimates moved south) for 2014 and 10% to $1.38 (as 5 of 7 estimates moved south) for 2015.
Other Stocks to Consider
Though we would avoid Genworth Financial for now, better-ranked life insurers include American Equity Investment Life Holding Co. (AEL), Fidelity & Guaranty Life Common (FGL) and Lincoln National Corporation (LNC).
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