A month has gone by since the last earnings report for Genworth Financial (GNW). Shares have lost about 0.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Genworth Financial due for a breakout? 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.
Genworth Financial (GNW) Beats on Q2 Earnings & Revenues
Genworth Financial delivered second-quarter 2018 adjusted operating income of 40 cents per share, which beat the Zacks Consensus Estimate of 27 cents by 48.2%. The bottom line also surged 33.3% from the year-ago quarter’s tally.
The reported quarter benefited from a strong performance at the mortgage business and life insurance business.
The company reported net income per share of 38 cents, which declined 5% from the prior-year period’s figure.
Total revenues of Genworth Financial improved 2.4% year over year to $2.2 billion. Moreover, the top line surpassed the Zacks Consensus Estimate by 1.3%.
Net investment income grew 3.4% year over year to $828 million.
Total benefits and expenses dipped 1.3% year over year to $1.8 billion, primarily owing to lower interest credited plus a decline in amortization of deferred acquisition costs and intangibles.
U.S. Mortgage Insurance: Adjusted operating income of $137 million soared nearly 51% year over year. Loss ratio for the reported quarter came in at (8%) against 2% recorded in the year-ago quarter. The second quarter benefited from lower new delinquencies, continued strong cure performance, favorable aging and a tax.
Canada Mortgage Insurance: Adjusted operating income was $46 million, up 12.2% year over year. Loss ratio deteriorated 1100 bps year over year to 15%, mainly due to lower favorable reserve development and an increase in new delinquencies, net of cures.
Australia Mortgage Insurance: Adjusted operating income of $22 million improved 83.3% from the year-ago quarter’s count. Loss ratio for the quarter under review improved 60 bps year over year to 28% owing to change in the premium earnings pattern.
U.S. Life Insurance: Adjusted operating income came in at $57 million, up 46.2% year over year, largely driven by solid results at Fixed Annuities and Life Insurance.
Runoff: Adjusted operating income of $13 million was up 18.2% year over year, primarily on the back of favorable mortality in the corporate owned life insurance product and favorable equity market performance supporting the company's variable annuity business.
Corporate and Other: Adjusted operating loss came in at $75 million, wider than the year-ago loss of $43 million.
Genworth Financial exited the quarter with cash, cash equivalents and invested assets of $73.7 billion, down 4.1% from the level at year-end 2017.
Long-term borrowings of Genworth Financial totaled $4 billion as of Jun 30, 2018, down 4.2% from the tally at 2017 end.
Book value per share was $25.078 as of Jun 30, 2018, having slid 1.2% from the year-ago quarter’s figure.
During the second quarter, CFIUS completed its review of the proposed transaction and reported that there are no unresolved national security concerns.
Oceanwide and Genworth Financial have entered into a fifth waiver and agreement on Jun 28, 2018, extending the deadline of each party's right to terminate the previously announced transaction to Aug 15, 2018.
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.
Currently, Genworth Financial 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 A on the value side, putting it in the top quintile 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.
Our style scores indicate that the stock is more suitable for value investors than momentum investors.
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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