U.S. Markets closed

Why Is Axis Capital (AXS) Up 4.9% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Axis Capital (AXS). Shares have added about 4.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Axis Capital 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.

AXIS Capital Q1 Earnings Miss Estimates, Down Y/Y

AXIS Capital Holdings Limited reported first-quarter 2019 operating income of $1.24 per share, missing the Zacks Consensus Estimate by 11.4%. Moreover, the bottom line declined 15.1% year over year, mainly due to lower revenues.

Operational Update

Operating revenues of about $1.2 billion lagged the Zacks Consensus Estimate by 1.6%. Also, the top line dipped 2.1% year over year.

Gross premiums written declined 3% year over year to about $2.6 billion, largely driven by a 3% decrease each in Insurance and Reinsurance segments.

Net investment income increased 6.2% year over year to nearly $107 million.

Total expenses in the quarter under review declined 3% year over year to $1.2 billion, courtesy of the reduced foreign exchange losses and the amortization of value of the business acquired.

AXIS Capital’s underwriting income totaled $778.2 million, down 45.9% year over year. Combined ratio expanded 610 basis points (bps) to 96.9%.
In the quarter under consideration, pre-tax cost savings of $17 million — $69 million on an annualized basis — related to the company’s transformation initiative and the integration of Novae have been recognized.

Segmental Results

Insurance: Gross premiums written fell 3.4% year over year to $851.1 million due to non-renewals and timing differences. However, the same was offset by a rise in liability and professional lines, driven by new business and marine lines plus favorable rate changes across the portfolio to some extent.

Net premiums earned declined 4% year over year to $556.7 million.
Underwriting income of $209 million plunged 69.9% year over year. Combined ratio expanded 850 bps to 96.6%.

Reinsurance: Gross premiums written in the first quarter were down 3% year over year to $173 million, primarily due to motor, credit and surety plus property lines on account of non-renewals. However, the metric was to some extent offset by a rise in catastrophe, accident and health, and liability lines supported by new business.

Net premiums earned slid 1.7% year over year to $577.5 million.
Underwriting income of $56.9 million significantly decreased 23.4% year over year. Combined ratio expanded 260 bps year over year to 91%.

Financial Standing

AXIS Capital exited the first quarter with cash and cash equivalents of $1.2 billion, down 6.6% from 2018-end level.
Senior notes were $1.3 billion, inching up by 0.1% from 2018 end.

Book value per share increased 5.8% year over year to $52.84 as of Mar 31, 2019 compared with the figure as of Dec 31, 2018.
Operating return on equity totaled 9.5% at the end of the first quarter compared with 10.8% in the year-ago period.

Dividend Update

The company announced a dividend of 40 cents per share in the reported quarter. Over the past year, total dividends declared amounted to $1.58 per share
         
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -5.82% due to these changes.

VGM Scores

Currently, Axis Capital has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Axis Capital has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.



Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.