On Feb 27, Zacks Investment Research upgraded EMC Insurance Group Inc. (EMCI) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).
Why the Upgrade?
EMC Insurance Group has been experiencing rising earnings estimates on the back of improved fourth-quarter 2013 results. Moreover, improved reinsurance operations, stable reserves and earnings outlook for 2014 have been impressive. Additionally, this property-casualty insurer and reinsurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 126.8%.
On Feb 20, EMC Insurance Group reported fourth-quarter 2013 operating earnings per share of 95 cents, which topped the Zacks Consensus Estimate of 87 cents and beat the management guidance. However, earnings fell from the year-ago quarter number of 99 cents a share.
Results were supported by 14.3% year-over-year top-line growth, primarily driven by 15.5% improvement in premiums earned. These were partially offset by higher underwriting, loss and other operating expenses, resulting in a deteriorated combined ratio. Nonetheless, book value per share rose 10.1% year over year to $34.21, reflecting improved equity and capital position.
Going ahead, earnings between $3.00 and $3.25 per share in 2014 appears optimistic and figures above the 2013 equivalent of $2.88 per share. Moreover, targeted growth within its Reinsurance and Property and Casualty Insurance segments should mitigate risks in the investment portfolio. Gradual policy rate hikes, higher retained policies, addition of new business along with a healthy capital position augur long-term growth for the company.
Based on EMC Insurance Group’s fundamental strength and capital management, the Zacks Consensus Estimate for 2014 jumped 27.8% to $3.13 per share in the last 7 days. Moreover, the same for 2015 remained intact at $2.60 during the same period. Meanwhile, no downward revision in estimates was witnessed for both the years.
Other Stocks to Consider
Global Indemnity Plc (GBLI), AmTrust Financial Services Inc. (AFSI) and American Financial Group Inc. (AFG) sport the same Zacks Rank as EMC Insurance Group and are worth considering.
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