On Nov 18, we upgraded our recommendation on Amerisafe Inc. (AMSF) to Outperform based on the remarkable improvement in its operating and underwriting performance.
Why the Upgrade?
Estimates for Amerisafe have witnessed a rising trend since the company reported its third-quarter 2013 results on Oct 31. The company’s earnings per share of 54 cents and revenues of $88 million exceeded the year-ago results by 54.3% and 9.5%, respectively.
However, the top line lagged the Zacks Consensus Estimate by 5.4%, although the bottom line outpaced the same benchmark by 12.5%. Amerisafe delivered positive earnings surprises in 2 of the last 4 quarters with an average beat of 9.4%.
Higher premiums and improved underwriting results primarily shored up the financials. Extraordinary improvement in combined ratio, book value per share, operating cash flow and ROE also reflect significant growth.
Following the release of the third-quarter results, the Zacks Consensus Estimate for 2013 edged up 1.5% to $1.99 per share in the last 30 days. Moreover, the Most Accurate Estimate for Amerisafe’s 2013 earnings stands at $2.01 a share, resulting in a positive Earnings ESP of 1.0%.
Additionally, the Zacks Consensus Estimate for 2014 rose 2% to $2.52 a share over the same period. On a year-over-year basis, earnings in 2013 is expected to increase 34.1%, and further escalate 26.8% in 2014. With the Zacks Consensus Estimate for both 2013 and 2014 reflecting upward pressure on the stock, the company now has a Zacks Rank #2 (Buy).
Amerisafe is focusing on optimizing its market position amid changing market dynamics. The recent price hikes and a healthy competitive edge are also boding well for the company’s operating leverage. With its prudent capital management and incremental capital deployment, we believe Amerisafe warrants a strong growth outlook going forward.
Other Financial Stocks That Warrant a Look
Apart from Amerisafe, other outperformers in the financial sector include Employers Holdings Inc. (EIG), Hilltop Holdings Inc. (HTH) and Kemper Corp. (KMPR). All these stocks carry a Zacks Rank #1 (Strong Buy).