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Homeowners Choice: A Strong Buy

Zacks Equity Research

On Mar 13, Zacks Investment Research upgraded Homeowners Choice Inc. (HCI) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Homeowners Choice has been witnessing rising earnings estimates on the back of strong fourth-quarter 2012 results, which included a 67.6% positive earnings surprise. Moreover, this property and casualty insurer delivered positive earnings surprises in all 4 quarters of 2012 with an average beat of 35.4%.

The year-to-date return for the stock came in at 20.2%, way above the S&P 500 return of 2.3%.

Homeowners reported its fourth-quarter results on Mar 5. Non-GAAP earnings per share came in at $1.19 surpassing the Zacks Consensus Estimate of 70 cents. Results also improved 85.9% year over year from 64 cents in 2011. It also marked HCI’s 21st consecutive quarter of profitability

Top line improved 39.7% year over year to $51.1 million, driven by strong improvement in net premiums earned (up 38.3% year over year).

Additionally, the Homeowners dividend of 22.5 cents per share produces a dividend yield of 3.53% which is better than the industry average of 2.09%. In the fourth quarter of 2012, the company also paid a special dividend of 10 cents per share.

The Zacks Consensus Estimate for 2013 increased 3.3% to $3.11 per share as 1 of 3 estimates was revised higher over the last 7 days. The estimate also represents a year-over-year increase of 2.87%. The Zacks Consensus Estimate for 2014 is pegged at $2.89.

Other Stocks to Consider

Other property and casualty insurers like Arch Capital Group Ltd. (ACGL), XL Group Plc (XL) and Navigators Group Inc. (NAVG), carry a Zacks Rank #1 (Strong Buy) and are worth noting.

Read the Full Research Report on XL

Read the Full Research Report on ACGL

Read the Full Research Report on NAVG

Read the Full Research Report on HCI

Zacks Investment Research

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