Markel (MKL) Gains 15% YTD: Will It Retain the Bull Run?
Markel Group’s MKL shares have gained 15.3% year to date against the industry’s decrease of 0.9%. A niche focus, improved pricing, effective risk management, strategic buyouts and solid capital position should continue to drive this Zacks Rank #2 (Buy) company.
Markel, with a market capitalization of $20.2 billion, has a decent history of delivering positive surprises. It beat estimates in three of the last four reported quarters, while missing in one. Earnings of this insurer increased 29% in the last five years, outperforming the industry average of 10.6%.
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Can the Stock Retain the Momentum?
The Zacks Consensus Estimate for 2023 earnings is pegged at $84.42 per share, implying an increase of 26% from the year-ago reported figure on 10.2% higher revenues of $14.6 billion. The consensus estimate for 2024 earnings is pegged at $93.16, implying an increase of 10.4% from the year-ago reported figure on 8.8% higher revenues of $15.9 billion.
MKL has been generating improved premiums. Increase in new business volume, strong retention levels, continued increases in rates and expanded product offerings should help MKL retain the momentum.
Markel aims to double the size of its insurance operations and thus targets $10 billion of annual insurance premiums in five years. This should lead to $1 billion of annual underwriting profit. MKL envisions to achieve this target, largely banking on organic growth of its existing operations. We estimate operating revenues to witness a three-year CAGR (2022-2025) of 13.4%.
Investment income benefits from an improving rate environment. Thus, Markel’s fixed maturity portfolio is poised to gain, given higher yield rates. Markel believes the impact will become more meaningful in the future as lower-yielding securities mature and are replaced by higher-yielding securities. We estimate a 42.7% increase in net investment income in 2023.
Through Markel Ventures, MKL has been investing in the ownership of the best asset management firms. The company has been pursuing acquisitions to achieve profitable growth in insurance operations and to create additional value on a diversified basis in Markel Ventures operations.
Markel has a solid capital position that aids in effective capital deployment.
Attractive Valuation
The company’s shares are trading at a forward price-to-earnings multiple of 16.7, lower than the industry average of 19.7. Before valuation expands, it is wise to take a position in the stock.
It has a Value Score of B. 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 combined with a Zacks Rank #1 (Strong Buy) or #2 offers better returns.
Other Stocks to Consider
Some other top-ranked stocks from the same industry are General Electric GE, ITT ITT and 3M Company MMM.
The Zacks Consensus Estimate for GE’s 2024 earnings indicates a year-over-year increase of 90%. GE delivered a four-quarter average earnings surprise of 35.43%. It carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for 2023 and 2024 earnings has moved up by 11.8% and 10.8% in the past 60 days. Shares of GE have gained 34.8% year to date.
The Zacks Consensus Estimate for ITT’s 2023 and 2024 earnings indicates a year-over-year increase of 14.61% and 11.6%, respectively. ITT delivered a four-quarter average earnings surprise of 6.44%.
The consensus estimate for 2023 and 2024 earnings has moved up by 3.7% each in the past 30 days. Shares of ITT have gained 17.3% year to date. It carries a Zacks Rank #2.
The Zacks Consensus Estimate for MMM’s 2024 earnings indicates a year-over-year increase of 9.3%. MMM delivered a four-quarter average earnings surprise of 13.79%. It carries a Zacks Rank #2.
The consensus estimate for 2023 and 2024 earnings has moved up 3.5% and 2.5% in the past 30 days. Shares of MMM have lost 18.7% year to date.
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