On Aug 21, 2014, Zacks Investment Research upgraded Fortegra Financial Corporation (FRF) to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
Fortegra Financial has been witnessing rising earnings estimates on the back of strong second-quarter 2014 earnings which surpassed the Zacks Consensus Estimate by 33%. This led to a bullish sentiment on the stock, and in turn an 8.8% increase in the 2014 Zacks Consensus Estimate to 74 cents per share over the last 30 days.
Fortegra Financial reported second quarter financial results on Aug 11. The top line, apart from beating the Zacks Consensus Estimate, improved 5.2% year over year largely on the back of organic growth in total revenue, decline in member benefit claims, and net losses and loss adjustment expenses.
Strong focus on revenue improvement and expense management reinstated faith in the stock. Moreover, cost containment initiatives helped the company to improve its earnings before interest, taxes, depreciation and amortization (EBITDA) margins without having to compromise on the quality of services offered. Impressive performance in the first half of the year also prompted Fortegra Financial to reiterate its 2014 revenue growth outlook at 7–9% and the adjusted EBITDA margin outlook at 32–34%. At second-quarter end, Fortegra Financial’s cash position remained strong, which should help in consolidating its inorganic growth going forward.
Since the company posted strong second-quarter earnings, it has been trading at a 52-week high of $9.88. In fact, shares of the company soared 40.5% since it reported earnings, to close at $9.86 in the last trading session. Moreover, the one-year return from the stock is 26.57%, higher than the S&P 500’s return of 19.96% and that of other players in the multi-line insurance space like Brown & Brown Inc. (BRO) and Arthur J. Gallagher & Co. (AJG), which generated returns of -1.36% and 7.94% respectively.
Notably, last week, Tiptree Financial Inc. (TIPT) agreed to acquire Fortegra Financial for $218 million. The deal is awaiting regulatory approval.
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