Old Republic International Down to Sell on Weak Q2 Earnings

On Aug 27, 2014, Zacks Investment Research downgraded Old Republic International Corporation (ORI) to a Zacks Rank #4 (Sell).

Why the Downgrade?

Old Republic International has witnessed downward estimate revisions for 2014 and 2015 following disappointing second quarter results. Given its expected negative earnings growth rates in the upcoming quarters, it has more downside left.

Old Republic International’s second-quarter earnings missed the Zacks Consensus by 4% and plunged 64.2% year over year. Total revenue of $1.3 billion was down 8.7% year over year but came in line with the Zacks Consensus Estimate.

Results were impacted by higher case settlement and litigation costs in the consumer credit indemnity ("CCI") portion of the run-off business. Moreover, intermittent weaknesses in real estate and mortgage markets also affected the results.

The company is also experiencing softness in its Title Insurance business in where premium and fees declined 16.5% year over year for the six months ended Jun 30, 2014, mainly due to a significant drop in refinance transactions since mid 2013. Moreover, a rise in mortgage interest rates also ended up in reduced mortgage extensions, creating further pressure on the segment’s top line.

Old Republic isn’t looking too great from an earnings estimate revision perspective either. The Zacks Consensus Estimate for 2014 has moved down 16.7% to 90 cents over the last 60 days. The same for 2015 fell 0.9% to $1.09 per share over the same time frame.

Other Stocks to Consider

While Old Republic International’s unimpressive Zacks Ranks does not call for investor attention, some better-ranked stocks in the industry include American International Group, Inc. (AIG), BB Seguridade Participa (BBSEY) and Fortegra Financial Corp. (FRF). All these stocks carry a Zacks Rank #2 (Buy).