HCC Insurance (HCC) Up to Strong Buy Ahead of Q1 Earnings - Analyst Blog
On Apr 15, 2015, Zacks Investment Research upgraded HCC Insurance Holdings Inc. HCC by a notch to a Zacks Rank #1 (Strong Buy).
Why the Upgrade?
HCC Insurance has witnessed rising earnings estimates on the back of improved core fundamentals in 2014, followed by favorable fourth-quarter 2014 results. Moreover, the company’s strong underwriting capabilities, benign catastrophe losses and capital position have been impressive, evident from the 10% increase in book value per share in 2014.
Additionally, this property-casualty insurer delivered positive earnings surprises in three of the last four quarters with an average beat of 6.4%. HCC Insurance’s fourth-quarter earnings, reported on Feb 10, also garnered growth from lower net loss ratios and 5% rise in net premiums, while investment income remained stable. Notably, operating cash flow surged to $478.6 million in 2014 against $262.7 million in 2013, reflecting strong liquidity.
Additionally, HCC Insurance’s debt profile remains impressive with a debt-to-capital ratio that improved to 18.1% at 2014-end from 22.6% at 2013-end. A healthy balance sheet and capital have also been facilitating efficient capital deployment via share buybacks and dividend payouts, thereby boosting investors’ confidence in the stock. With no severe catastrophe losses and stable underwriting during first-quarter 2015, the company poses positive drive as it is slated to release results after the closing bell on Apr 28.
Upward estimate revisions also boost optimism. Accordingly, the Zacks Consensus Estimate for 2015 rose by a nickel to $4.00 in the last 60 days. The estimate for 2016 is pegged at $4.19, up 4 cents in the same period. Meanwhile, no downward revision in estimates was witnessed for both the years.
Moreover, the Most Accurate estimate for HCC Insurance’s 2015 and 2016 earnings currently stands at $4.07 and $4.41 a share, which translates into an Earnings ESP of +1.8% and +5.3%, respectively. This indicates the possibility of earnings beat for both this year and the next.
Meanwhile, a sturdy product portfolio and healthy capital position have been fuelling improved market trends. Subsequently, HCC Insurance outperformed the one-year S&P 500, which posted a 15.4% increase against the solid return of 30.2% clocked by the company.
Other Promising Insurers
Investors interested in the insurance industry may also consider stocks like Heritage Insurance Holdings Inc. HRTG, Fidelity National Financial Inc. FNF and Universal Insurance Holdings Inc. UVE. Allthese stocks sport the same Zacks Rank as HCC Insurance.
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