Why Is Palomar (PLMR) Down 11.7% Since Last Earnings Report?
It has been about a month since the last earnings report for Palomar (PLMR). Shares have lost about 11.7% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Palomar 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.
Palomar Q2 Earnings, Revenues Top Estimates, Rise Y/Y
Palomar Holdings, Inc. reported second-quarter 2023 operating income of 86 cents per share, which beat the Zacks Consensus Estimate by 3.6%. The bottom line increased 17.8% year over year.
Palomar witnessed improved premiums and net investment income, partly offset by higher losses and loss adjustment expenses and other underwriting expenses.
Behind the Headlines
Total revenues improved 5.8% year over year to $89.3 million, mainly attributable to higher premiums and net investment income. The top line beat the Zacks Consensus Estimate by 5.3%. Gross written premiums increased 25.4% year over year to $274.3 million. Our estimate was $223.4 million. Net earned premiums increased 3.5% year over year to $83.2 million. Our estimate was $89 million. The Zacks Consensus Estimate is pegged at $89 million.
Net investment income increased 76.5% year over year to $5.5 million, driven by higher yields on invested assets and a higher average balance of investments held during the three months ended Jun 30, 2023 due to cash generated from operations. The Zacks Consensus Estimate is pegged at $5.2 million. Our estimate was $3.9 million.
Palomar witnessed an underwriting income of $17.4 million, 13% lower than the year-ago income of $20 million. Adjusted underwriting income was $23.1 million, 6.9% lower than the year-ago figure. Total expenses of $67.4 million increased 9.8% year over year due to higher losses and loss adjustment expenses, underwriting expenses and interest expenses. Our estimate was $68.8 million.
The loss ratio was 21.5, which deteriorated 360 basis points (bps) year over year. Our estimate was 18.2. The Zacks Consensus Estimate was pegged at 23.8. Adjusted combined ratio, excluding catastrophe losses, deteriorated 310 bps year over year to 72.2. The Zacks Consensus Estimate was pegged at 73.
Financial Update
Cash and cash equivalents increased 14% from 2022-end to $58.6 million at second-quarter 2023-end. Shareholder equity increased 7.5% from 2022-end to $413.7 million. Annualized adjusted return on equity in the second quarter of 2023 was 21.3%, contracting 240 bps year over year. PLMR bought back shares worth $8.7 million in the second quarter of 2023. As of Jun 30, 2023, $50 million remained under authorization.
2023 View
Palomar aims to achieve adjusted net income in the range of $89 million to $93 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates review.
The consensus estimate has shifted 5.14% due to these changes.
VGM Scores
At this time, Palomar has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of C on the value side, putting it in the middle 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.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Palomar has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Palomar is part of the Zacks Insurance - Property and Casualty industry. Over the past month, First American Financial (FAF), a stock from the same industry, has gained 0.3%. The company reported its results for the quarter ended June 2023 more than a month ago.
First American Financial reported revenues of $1.65 billion in the last reported quarter, representing a year-over-year change of -20.1%. EPS of $1.35 for the same period compares with $1.97 a year ago.
For the current quarter, First American Financial is expected to post earnings of $1.09 per share, indicating a change of -32.7% from the year-ago quarter. The Zacks Consensus Estimate has changed +0.9% over the last 30 days.
First American Financial has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
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