On Mar 10, Zacks Investment Research upgraded AmTrust Financial Services Inc. AFSI by two notches to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
AmTrust Financial has been witnessing an upward trend in earnings estimates ever since it reported a strong fourth-quarter 2014 results on Feb 11. Additionally, the company’s strategy of growth through consolidation is impressive given its prudent risk and capital management practices.
This specialty property-casualty insurer has kept its earnings streak alive throughout 2014 with an average beat of 40.4%. Its fourth-quarter 2014 operating earnings per share of $1.46 also topped the Zacks Consensus Estimate by about 20% and the year-ago quarter figure by 18%.
Despite higher underwriting and acquisition expenses, lower interest and tax expenses favored the bottom line. On the other hand, the top-line ascent of 28% was driven by 28% growth in net earned premiums, 9% jump in service and fee income and 73% escalation in investment income.
Notably, operating return on equity improved substantially to 29.9% at 2014-end against 22.5% at 2013-end. An appreciated book value, cash position and asset base also augur optimism, paving the way for accelerated capital deployment via acquisitions and dividend payouts.
The company has already executed three acquisitions so far this year, while about four firms were acquired in 2014. These acquisitions blend well with AmTrust Financial’s growth strategy, thereby enhancing its product-suite well.
Meanwhile, the company’s debt management has been exemplary amid acquisitions, as reflected by its long-term financial leverage that improved by 90 basis points from 2013-end to 27.1% at 2014-end. These factors further boost the confidence of investors and ratings agencies.
Accordingly, the Zacks Consensus Estimate for 2015 and 2016 moved north by 0.4% and 4.6% to $5.52 and $6.09 per share, respectively, in the last 30 days. Moreover, the Most Accurate estimate for AmTrust Financial’s 2015 and 2016 earnings stand at $5.81 and $6.14 a share, resulting in an Earnings ESP of +5.3% and +0.8%, respectively. This indicates a likely earnings beat for both years. Notably, no downward estimate revision was witnessed for these years.
Meanwhile, steady growth, diversified product portfolio and healthy capital position have also been fueling improved market trends. Subsequently, AmTrust Financial outperformed the one-year Nasdaq index that posed growth of 12.1%, by yielding a return of 44.4%.
Other Promising Insurers
Investors interested in the insurance industry could also consider stocks likeArch Capital Group Ltd. ACGL, Endurance Specialty Holdings Ltd. ENH and Heritage Insurance Holdings Inc. HRTG. All these stocks sport the same Zacks Rank as AmTrust.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment