AXIS Capital (AXS) Rises 3% YTD: Will the Upside Continue?
AXIS Capital Holdings Limited’s AXS shares have gained 3% year to date, in line with the industry’s increase. With a market capitalization of $4.8 billion, the average volume of shares traded in the last three months was about 0.6 million.
Focus on expansion into new verticals, the increasing popularity of index products in the market, solid balance sheet and effective capital deployment continue to drive this Zacks Rank #2 (Buy) property and casualty insurer.
AXS has a decent history of delivering earnings surprises in three of the last four reported quarters while missing in the other one.
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Return on equity was 12.7% in the trailing 12 months, better than the industry average of 6.7%. AXIS Capital eyes a low-90s combined ratio to fuel attractive ROE.
Can It Retain the Momentum?
The Zacks Consensus Estimate for 2023 earnings stands at $7.74, suggesting an increase of 33.2% on 7.6% higher revenues of $5.7 billion. The consensus estimate for 2024 earnings stands at $8.60, suggesting an increase of 11.1% on 6% higher revenues of $6 billion.
While its earnings have grown 38.9% over the last five years, outperforming the industry average of 16.5%, the long-term earnings growth rate is currently pegged at 5%.
The Zacks Consensus Estimate for AXS’s 2023 and 2024 earnings has moved 4.9% and 1.2% north, respectively, in the past 30 days, reflecting analysts’ optimism.
Rate increase, prudent underwriting and PML reductions supported by third-party capital should continue to improve the risk-adjusted return for the specialty insurer. AXIS Capital expects disciplined pricing to continue in insurance and reinsurance through 2023.
AXIS Capital has been growing its business lines, which are likely to provide a solid double-digit return on equity opportunities. This specialty insurer remains focused on delivering sustained profitable growth and increased shareholder value.
In tandem with the industry’s trend of accelerated digitalization, AXS has been investing in technology, which will help it effectively use data, ensure higher-value processes and activities, support new lines of business and enable efficient operations.
The company’s sturdy capital position supports effective capital deployment. AXS has increased its dividend at an eight-year CAGR (2015 – 2022) of 5.3%. AXS has raised dividend for 18 straight years and targets a 35-45% dividend payout over the medium term. AXS also has $100 million remaining under its authorization.
Attractive Valuation
AXS’ shares are trading at a price-to-book value multiple of 1.08, lower than the industry average of 1.41. It has a favorable Value Score of A. Back-tested results have shown that stocks with a Value Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or #2, are best investment opportunities.
Other Stocks to Consider
Some other top-ranked stocks from the insurance industry are RLI Corporation RLI, Kinsale Capital Group KNSL and Berkshire Hathaway (BRK.B).
RLI delivered a four-quarter average earnings surprise of 43.50%. Year to date, the insurer has lost 1.8%.
The Zacks Consensus Estimate for RLI’s 2023 earnings indicates a year-over-year increase of 4.1%. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale delivered a four-quarter average earnings surprise of 14.77%. Year to date, the insurer has gained 23.8%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings indicates a respective year-over-year increase of 32.9% and 19.7%. It sports a Zacks Rank #1.
Berkshire Hathaway delivered a four-quarter average earnings surprise of 20.29%. Year to date, the insurer has gained 3%.
The Zacks Consensus Estimate for BRK.B’s 2023 and 2024 earnings indicates a respective year-over-year increase of 35.8% and 1.3%. It carries a Zacks Rank #2.
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RLI Corp. (RLI) : Free Stock Analysis Report
Berkshire Hathaway Inc. (BRK.B) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
