A month has gone by since the last earnings report for Palomar (PLMR). Shares have added about 8% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Palomar 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 drivers.
Palomar Q1 Earnings Beat, Revenues Miss Estimates
Palomar Holdings reported first-quarter 2021 operating income of 73 cents per share, beating the Zacks Consensus Estimate by 43.1%. The bottom line also improved 46% year over year.
Palomar witnessed improved premiums and net investment income, partially offset by higher expenses.
Behind the Headlines
Total revenues improved 31.6% year over year to $50 million, mainly attributable to higher premiums, net investment income, and commission and other income. However, the top line missed the Zacks Consensus Estimate by 2.2%.
Gross written premiums increased 44.9% year over year to $103.6 million. Net written premiums also increased 35.2% year over year to $42.3 million.
Net investment income increased 9% year over year to $2.2 million, driven by higher average balance of investments, partially offset by lower yields on invested assets.
Palomar witnessed underwriting income of $18.6 million, up 47.2% year over year.
Total expenses of $29.1 million increased 27.5% year over year due to higher acquisition and underwriting expenses.
Adjusted combined ratio, excluding catastrophe losses, improved 830 basis points (bps) year over year to 53.3.
Cash and cash equivalents increased 29.7% from the 2020-end level to about $23.6 million at first quarter 2021-end.
Shareholder equity increased 3.5% from 2020-end to $376.4 million.
Annualized adjusted return on equity was 20.8% for the reported quarter, expanding 20 bps year over year.
Palomar estimates adjusted net income between $64 million and $69 million, which includes the impact of winter storm Uri in Texas.
For first-half 2021, the company expects Uri to result in a net underwriting loss of $1 million, comprising $4 million of additional reinsurance expense in first-quarter 2021 and similar additional reinsurance expense in second-quarter 2021, partially offset by negative net losses in the reported quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -9.63% due to these changes.
At this time, Palomar has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 C. 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 these revisions indicates a downward shift. Notably, Palomar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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