It has been about a month since the last earnings report for RLI Corp. (RLI). Shares were flat in that time frame, outperforming the S&P 500.
Will the recent trend continue leading up to its next earnings release, or is RLI Corp. 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.
RLI Corp.'s Q2 Earnings Beat Estimates, Revenues Miss
RLI Corp.’s second-quarter 2019 operating earnings of 66 cents per share surpassed the Zacks Consensus Estimate by 13.8%. The bottom line increased 10% from the prior-year quarter.
RLI witnessed improved premiums across most of its product lines along with increase in net investment income in the reported quarter.
Operating revenues for the reported quarter totaled $224.5 million, up 1.6% year over year. This upside can be attributed to higher net premiums earned and net investment income. However, the top line missed the Zacks Consensus Estimate by 1.1%.
Gross premiums written increased 5% year over year to $283.3 million. The uptick can be attributed to solid performance of Casualty and Property segments.
Total expenses increased 6.1% year over year to $197.8 million, primarily due to increased insurance operating expenses, loss and settlement expenses, policy acquisition costs, interest expense and general corporate expense.
Net investment income rose nearly 16.6% year over year to $17 million. Total return from the investment portfolio was 2.9%.
The company reported underwriting income of $14.9 million, which increased 5.7% from the year-ago period. This upside was due to solid results at the Surety and Casualty segments, partially offset by soft performance of the Property segment.
The company exited the second quarter with total investments and cash of $2.4 billion, up 10.1% from 2018 end.
Book value was $21.43 per share as of Jun 30, 2019, up 21% from the figure as of Dec 31, 2018.
Long-term debt was $149.2 million, up 0.1% from Dec 31, 2018.
Statutory surplus improved 9.7% to $984.9 million, up 18.7% from Dec 31, 2018.
Return on equity was 20.7%, reflecting an increase of 1100 basis points.
Net cash flow from operations declined 11.9% year over year to $74.6 million in the quarter under review.
On Jun 20, 2019, the company paid out a cash dividend of 23 cents per share. Dividends totaled $603 million in the last five years.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -11.11% due to these changes.
At this time, RLI Corp. has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, RLI Corp. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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