Markel Group (MKL) Up 7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Markel Group (MKL). Shares have added about 7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Markel Group due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Markel's Q4 Earnings Beat, Revenues Lag Estimates
Markel Group Inc. reported fourth-quarter 2023 net operating earnings per share of $56.48, which beat the Zacks Consensus Estimate by 139.5%. The bottom line more than doubled year over year. Markel witnessed improved earned premiums and increased net investment income.
Quarterly Operational Update
Total operating revenues of $3.7 billion missed the Zacks Consensus Estimate by 1.1%. The top line rose 2.7% year over year. Net investment income increased 46.9% year over year to $213 million in the fourth quarter. MKL’s combined ratio deteriorated 1300 basis points (bps) year over year to 107 in the reported quarter.
Full-Year Update
Revenues of $15.8 billion increased 35.4% from 2022. Earned premiums grew 9% to $8.3 billion, reflecting growth in gross premium volume in recent periods Combined ratio deteriorated 600 bps to 98, primarily attributable to a higher attritional loss ratio.
Segment Update
Insurance: Gross premiums increased 7% year over year to $9.2 billion. The uptick was driven by more favorable rates and new business growth across many product lines, most notably personal lines and property product lines.
Underwriting profit came in at $162.2 million, down 71% year over year. The combined ratio deteriorated 620 bps year over year to 97.8. It included $39.6 million of net losses and loss adjustment expenses attributed to the 2023 catastrophes.
Reinsurance: Gross premiums decreased 15% year over year to $1 billion, primarily attributable to lower gross premiums within professional liability product lines.
Underwriting loss was $19.3 million against the year-ago income of $83.8 million. The combined ratio deteriorated 980 bps year over year to 101.9 in 2023. It included $57.1 million of adverse development on prior accident years’ loss reserves.
Markel Ventures: Operating revenues of $5 billion improved 5% year over year. The growth was driven by higher revenues at construction services businesses and transportation-related businesses, as well as a contribution from Metromont.
Operating income of $437.5 million increased 55% year over year, driven by products businesses, particularly consumer and building products businesses.
Financial Update
Markel exited 2023 with invested assets of $30.8 billion, up from $27.4 billion at 2022 end. The debt balance decreased year over year to $3.8 billion as of Dec 31, 2023 from $4.1 billion at 2022 end.
Shareholders' equity of $15 billion at 2023 end decreased from $13.2 billion at 2022 end. Book value per share increased 17.1% from year-end 2022 to $1,095.95 as of Dec 31, 2023.
Net cash provided by operating activities was $2.8 billion in 2023, up from $2.7 billion in 2022, reflecting an increase in operating cash flows from Markel Ventures and investments.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -14.66% due to these changes.
VGM Scores
Currently, Markel Group has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. 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. Notably, Markel Group has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Markel Group is part of the Zacks Diversified Operations industry. Over the past month, General Electric (GE), a stock from the same industry, has gained 15.9%. The company reported its results for the quarter ended December 2023 more than a month ago.
GE reported revenues of $18.52 billion in the last reported quarter, representing a year-over-year change of -15%. EPS of $1.03 for the same period compares with $1.24 a year ago.
GE is expected to post earnings of $0.64 per share for the current quarter, representing a year-over-year change of +137%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for GE. Also, the stock has a VGM Score of D.
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