Here's Why AXIS Capital (AXS) is Investors' Favorite Now
AXIS Capital Holdings Limited’s AXS compelling and diversified product portfolio, underwriting excellence, digital capabilities, solid capital position and favorable growth estimates make it worth retaining in one’s portfolio. Year to date, the stock has gained 12% compared with the industry’s increase of 15.8%.
This Zacks Rank #1 (Strong Buy) specialty insurer has a solid record of delivering an earnings surprise in the last four quarters. Earnings have grown 82.7% in the past five years, better than the industry average of 11%
This leading specialty insurer and global reinsurer, aiming for leadership in specialty risks, has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
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Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings is pegged at $10.10, indicating an increase of 2.5% on 3.6% higher revenues of $5.9 billion. The consensus estimate for 2025 earnings is pegged at $11.07, indicating an increase of 9.6% on 7.4% higher revenues of $6.4 billion.
The expected long-term earnings growth rate is pegged at 5%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 4.8% and 1.2% north, respectively, in the past 30 days, reflecting analyst optimism.
Business Tailwinds
AXS’ insurance business should benefit from a diversified portfolio of global specialty businesses, leadership positions and growth opportunities across major business lines. The Reinsurance business should benefit from strong cycle management that focuses on improving the business mix. The lines of business, on average, witnessed a double-digit rate increase. The insurer intensified its focus on attractive Casualty, Specialty, A&H and Credit lines.
The insurer is also working with its partners in distribution to use expanded digital capabilities to create new business growth. Aiming leadership in specialty risks, AXS remains focused on growth in marine cargo, cyber and renewable energy, which is likely to provide a strong double-digit return on equity (ROE) opportunities, as well as the pet insurance market via its accident and health lines of business.
Prudent Capital Deployment
Axis Capital’s solid capital position, aided by operational expertise, supports effective capital deployment. Apart from prioritizing investments in growth initiatives that ramp up specialty businesses, it has also hiked its dividend for 18 consecutive years at an eight-year CAGR (2015 – 2022) of 5.3%. Its dividend yield is currently 2.8%, way above the industry average of 0.3%. The insurer boasts one of the highest dividend yields among its peers.
Apart from this, AXS also has a $100 million share buyback remaining under its authorization for this year.
Attractive Valuation
Shares of AXS are trading at a book-to-price multiple of 1.2, lower than the industry average of 1.7.
It has a Value Score of A. This style score helps find the most attractive value stocks. Back-tested results have shown that stocks with a Value Score of A or B and a Zacks Rank #1 or 2 (Buy) offer better returns.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are The Progressive Corporation PGR, Mercury General Corporation MCY and Arch Capital Group Ltd. ACGL. While Axis Capital and Mercury General sport a Zacks Rank #1 each at present, Arch Capital carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Progressive Corporation has a decent record of beating earnings estimates in two of the trailing four quarters while missing in the other two. Year to date, the insurer has gained 20.5%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $10.10 and $11.07, respectively, indicating a year-over-year increase of 45.3% and 17%.
Mercury General beat estimates in three of the last four quarters and matched in one, the average being 3,417.48%. Year to date, the insurer has rallied 33.3%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $2.90 and $3.90, indicating a year-over-year rise of 866.67% and 34.48%, respectively.
Arch Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 27.32%. Year to date, ACGL has jumped 17.4%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 revenues is pegged at $15.52 billion and $16.93 billion, indicating a year-over-year increase of 15% and 9%, respectively.
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
The Progressive Corporation (PGR) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
Mercury General Corporation (MCY) : Free Stock Analysis Report
