Axis Capital (AXS) Up 0.4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Axis Capital (AXS). Shares have added about 0.4% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Axis Capital due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

AXIS Capital Q3 Earnings Miss Estimates, Down Y/Y

AXIS Capital reported third-quarter 2019 operating loss of 39 cents against the Zacks Consensus Estimate of a breakeven. In the year-ago quarter, the company delivered earnings of 96 cents per share.

The company witnessed substantial underwriting loss across all business lines.

Operational Update

Operating revenues amounted to nearly $1.28 billion, which declined 5.3% year over year.

Gross premiums written declined 1% year over year to about $1.4 billion. The downside was primarily caused by 8% fall in the insurance segment, partially offset by 13% rise in the reinsurance segment. The metric inched up 1% on a constant-currency basis.

Net investment income increased 1.2% year over year to nearly $115.8 million.

Total expenses in the quarter under review declined 2.9% year over year to $1.24 billion, courtesy of reduced transaction and reorganization expenses, amortization of value of business acquired and foreign exchange gains.

Combined ratio deteriorated 1150 basis points (bps) to 109.4%.

Segmental Results

Insurance: Gross premiums written fell 7.7% year over year to $894.9 million due to the repositioning of the portfolio. It was partially offset by increase in liability lines driven by new business and favorable rate changes. Net premiums earned declined 12.7% year over year to $536.4 million

Underwriting loss of $17.9 million widened 52.8% year over year. Combined ratio deteriorated 130 bps to 103.5%.

Reinsurance: Gross premiums written increased 12.6% year over year to $511.6 million primarily owing to timing differences. Additionally, the increase in catastrophe lines was caused by new business. The uptick was partially offset by decline in property lines associated with the repositioning of the portfolio. Net premiums earned increased 1.9% year over year to $620.8 million.

The segment sustained underwriting loss of $60.8 million against an underwriting gain of $70.7 million in the year-ago quarter. Combined ratio deteriorated 2040 bps year over year to 109.9%.

Financial Standing

AXIS Capital exited the third quarter with cash and cash equivalents of $763.8 million, down 38% from 2018-end level.

Senior notes totaled $1.4 billion, up 3.4% from 2018 end.

Book value per share increased 0.5% year over year to $56.26 as of Sep 30, 2019.

Dividend Update

The company announced dividend payout of 40 cents per share in the reported quarter. In the past year, total dividend declared was $1.60 per share.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -73.43% due to these changes.

VGM Scores

At this time, Axis Capital has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Axis Capital has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.

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