Radian (RDN) Down 3% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for Radian (RDN). Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Radian due for a breakout? 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.
Radian Group Q3 Earnings Top, Insurance in Force Rises
Radian Group Inc. reported third-quarter 2023 adjusted operating income of $1.04 per share, which beat the Zacks Consensus Estimate by 31.6%. However, the bottom line decreased 20.6% year over year.
Operating revenues increased 6.5% year over year to $311 million due to higher net premiums earned and services revenues. The metric beat the Zacks Consensus Estimate by 6.4%. The results reflect the strength of the business model and the insured portfolio.
Quarter in Details
Net premiums earned were $237 million, up 0.9% year over year. Net investment income increased 33.9% year over year to $68.8 million. MI New Insurance Written decreased 21% year over year to $13.9 billion. Primary mortgage insurance in force in force increased 4% year over year to $269.5 billion, reflecting a 7% increase in monthly premium policy insurance in force and a 12% decline in single premium policy insurance in force.
Persistency — the percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 84% as of Sep 30, 2023, up 200 basis points (bps) year over year. Primary delinquent loans were 20,406 as of Jun 30, 2023, down 3.2% year over year.
Total expenses doubled year over year to $112.6 million. The expense ratio was 23.4, down 270 bps from the year-ago quarter.
Segmental Update
The Mortgage segment reported a year-over-year increase of 2.7% in total revenues to $288.6 million. Net premiums earned by the segment were $236.8 million, up 0.7% year over year. Claims paid were $5 million, flat year over year. The loss ratio was negative 3.5 compared with negative 41.5 in the year-ago quarter.
The homegenius segment’s revenues of $15 million decreased 40% year over year. Net premiums earned by the segment were $3.5 million, which decreased 31.1% year over year. Adjusted pre-tax operating loss was $21 million, narrower than the prior-year quarter loss of $26 million.
Financial Update
As of Sep 30, 2023, Radian Group solid cash balance of $55.5 million, reflecting an increase of 0.4% from the 2022 end level. The debt-to-capital ratio improved 110 bps to 25.4 from the 2022-end level. Book value per share, a measure of net worth, climbed 12.1% year over year to $26.69 as of Sep 30, 2023. In the third quarter, adjusted net operating return on equity was 16%, which deteriorated 650 bps year over year. As of Sep 30, 2023, Radian Guaranty’s Available Assets under PMIERs totaled approximately $5.8 billion, resulting in PMIERs excess Available Assets of $1.7 billion.
Share Repurchase and Dividend Update
Radian bought back 1.9 million shares worth $50 million, including commissions, in the third quarter. The remaining repurchase capacity was $230 million as of Sep 30, 2023. The board of directors paid a quarterly dividend of 22.5 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
Currently, Radian has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, 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 C. 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 this revision looks promising. Notably, Radian 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
Radian belongs to the Zacks Insurance - Multi line industry. Another stock from the same industry, Assurant (AIZ), has gained 2.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.
Assurant reported revenues of $2.79 billion in the last reported quarter, representing a year-over-year change of +8.5%. EPS of $4.29 for the same period compares with $1.01 a year ago.
For the current quarter, Assurant is expected to post earnings of $3.63 per share, indicating a change of +12.4% from the year-ago quarter. The Zacks Consensus Estimate has changed +5.2% over the last 30 days.
Assurant has a Zacks Rank #1 (Strong Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.
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Radian Group Inc. (RDN) : Free Stock Analysis Report
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