Markel (MKL) Up 7.3% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Markel (MKL). Shares have added about 7.3% 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 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.
Markel Q2 Earnings Rise Y/Y, Revenues Beat Estimates
Markel Corporation reported second-quarter 2020 net income of $65.75 per share, which improved 82.3% year over year.
The company witnessed solid performance of Insurance and Reinsurance Segments, partially offset by high operating expenses. Markel also reported solid underwriting results despite the adverse impact of the COVID-19-induced financial volatility.
Operational Update
Total operating revenues of $2.2 billion outpaced the Zacks Consensus Estimate by 2.5%. The top line also rose 10.3% year over year on higher premiums, and services and other revenues.
Net investment income plunged 14.5% year over year to $95.6 million in the second quarter.
Total operating expenses of Markel increased 6.6% year over year to $1.9 billion primarily due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, and services and other expenses.
In the second quarter, Markel reported consolidated underwriting profit of $157.6 million, which skyrocketed 167% year over year. Consolidated combined ratio improved 700 basis points (bps) year over year to 88% in the reported quarter.
Segment Update
Insurance: Net written premiums were up 12.6% year over year to $1.3 billion in the second quarter.
Underwriting profit came in at $135.1 million, which soared 183.9% year over year. Combined ratio improved 700 bps year over year to 88% in the quarter under review.
Reinsurance: Net written premiums improved 5.6% year over year to $188.8 million.
Underwriting profit was $24.8 million, which surged 180.8% year over year.
Combined ratio improved 600 bps year over year to 90% in the second quarter.
Markel Ventures: Segment profit of $79.4 million declined 2.8% year over year.
Financial Update
Markel exited the second quarter with cash and cash equivalents of $4.8 billion, up 57.3% from 2019 end.
Debt balance increased 2% to $3.6 billion as of Jun 30, 2020 from 2019 end.
Book value per share decreased 2% from year-end 2019 to $783.58 as of Jun 30, 2020.
In the first half of 2020, net cash from operating activities was $488.7 million, which skyrocketed 96.2% from the first half of 2019.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review. The consensus estimate has shifted 36.25% due to these changes.
VGM Scores
Currently, Markel has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Markel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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