It has been about a month since the last earnings report for Genworth Financial (GNW). Shares have added about 11.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Genworth Financial due for a pullback? 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.
Genworth Financial (GNW) Q3 Earnings Beat, Revenues Miss
Genworth Financial delivered third-quarter 2018 adjusted operating income of 29 cents per share, which beat the Zacks Consensus Estimate of 23 cents by 26.1%. The bottom line also soared 93.3% from the year-ago quarter’s tally.
The reported quarter benefited from a strong performance at the mortgage businesses.
Total revenues of Genworth Financial were $2.1 billion, flat year over year. However, the top line missed the Zacks Consensus Estimate by 0.7%.
Net investment income grew 2.3% year over year to $815 million on higher investment yields.
Total benefits and expenses declined 3.1% year over year to $1.9 billion, primarily owing to lower benefits and other changes in policy reserves, Interest credited, acquisition and operating expenses plus interest expense.
U.S. Mortgage Insurance: Adjusted operating income of $118 million soared nearly 61.6% year over year. Loss ratio improved 900 bps year over year to 11%. The third quarter benefited from a lower corporate tax rate and higher premiums from an increase in insurance in force.
Canada Mortgage Insurance: Adjusted operating income was $44 million, up 18.9% year over year. Loss ratio remained flat year over year at 14% as less favorable loss reserve development offset lower new delinquencies.
Australia Mortgage Insurance: Adjusted operating income of $17 million improved 41.7% year over year. Loss ratio improved 60 bps year over year to 28%, driven by an increase in earned premiums and a favorable loss performance.
U.S. Life Insurance: Adjusted operating loss came in at $3 million, wider than year-ago loss of $1 million due to higher loss at Long Term Care Insurance. However, this was partially offset by lower loss at Life Insurance and an improved income at Fixed Annuities.
Runoff: Adjusted operating income of $14 million was up 7.7% year over year, aided by lower taxes.
Corporate and Other: Adjusted operating loss came in at $45 million, narrower than the year-ago loss of $58 million.
Genworth Financial exited the quarter with cash, cash equivalents and invested assets of $73.2 billion, down 4.8% from the level at year-end 2017.
Long-term borrowings of Genworth Financial totaled $4 billion as of Sep 30, 2018, down 4.1% from the tally at 2017 end.
Book value per share (excluding accumulated other comprehensive income) was $21.43 as of Sep 30, 2018, having increased 6.6% from the year-ago quarter’s figure.
On Oct 26, 2018, the Delaware Department of Insurance announced that it has scheduled a public hearing on Nov 28, 2018 on the pending acquisition of Genworth Life Insurance Company (GLIC) by entities affiliated with Oceanwide.
Genworth and Oceanwide also announced that the parties agreed that Genworth Holdings will contribute a total of $175 million to GLIC in three phases — by the end of March 2019, by the end of September 2019 and by the end of January 2020.
In the mean time, Oceanwide and Genworth Financial are developing a new capital investment plan whereby Oceanwide would contribute an aggregate of $1.5 billion to Genworth Financial over time following the closing of the transaction. The contribution would be used to further improve Genworth Financial's financial stability, which might include retiring its debt due in 2020 and 2021 or enabling future growth opportunities.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.
At this time, Genworth Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Genworth Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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