It has been about a month since the last earnings report for Palomar (PLMR). Shares have added about 20.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Palomar 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 catalysts.
Palomar Surpasses Q2 Earnings and Revenue Estimates
Palomar Holdings, Inc.’s second-quarter 2020 operating earnings of 52 cents per share beat the Zacks Consensus Estimate by 8.3% and improved 44.4% from the prior-year quarter.
Palomar witnessed improved premiums along with increase in net investment income and underwriting income in the reported quarter.
Behind the Q2 Headlines
Total revenues improved 68% year over year to $42 million, mainly attributable to higher premiums, net investment income and commission and other income. Moreover, the top line exceeded the Zacks Consensus Estimate by 8.1%
Gross written premiums increased 43.6% year over year to $83.8 million. Net written premiums grew 59% year over year to $53.6 million owing to an increase in gross written premiums.
Net investment income increased 42.5% year over year to $2.1 million. The increase was primarily due to a higher average balance of investments held during the three months ended Jun 30, 2020, due primarily to proceeds from the company’s April 2019 IPO, investing of cash generated from operations and proceeds from the company’s January 2020 secondary offering.
Palomar witnessed underwriting gain of $12.4 million, up 73.7% from the year-earlier period.
Total expenses increased 59.8% to $27.8 million, mainly due to higher losses and loss adjustment expenses, acquisition expenses and other underwriting expenses.
Adjusted combined ratio deteriorated 130 basis points (bps) year over year to 65.1%.
As of Jun 30, 2020, Palomar Holdings had assets worth $584 million, up 47.7% from the level at 2019 end.
Cash and cash equivalents surged 230% from 2019-end level to about $109.3 million.
Shareholder equity at the end of the reported quarter increased 71.6% from 2019-end to $375.2 million.
Annualized adjusted return on equity was 16.4% in the second quarter of 2020, reflecting a contraction of 480 bps year over year.
Palomar Holdings affirmed its prior guidance of adjusted net income of $50.5 to $53.0 million, equating to a growth rate of 33% to 40% from 2019.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates flatlined during the past month.
Currently, Palomar has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Palomar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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