Why Is Radian (RDN) Down 1.5% Since Last Earnings Report?
A month has gone by since the last earnings report for Radian (RDN). Shares have lost about 1.5% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Radian 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.
Radian Group Q2 Earnings Top, Revenues Miss Estimates
Radian Group reported second-quarter 2023 adjusted operating income of 91 cents per share, which beat the Zacks Consensus Estimate by 19.7%. However, the bottom line decreased 33.3% year over year.
Operating revenues decreased 7.5% year over year to $279 million due to lower net premiums earned and services revenues. The metric missed the Zacks Consensus Estimate by 3.6%.
The results reflected higher monthly premium policy insurance in force and a decline in single premium policy insurance in force, partially offset by higher expenses.
Quarter in Details
Net premiums earned were $213.4 million, down 15.9% year over year. Net investment income increased 36.7% year over year to $64.2 million.
MI New Insurance Written decreased 10.6% year over year to $16.9 billion.
Primary mortgage insurance in force in force increased 5% year over year to $266.9 billion, reflecting 8% increase in monthly premium policy insurance in force and a 12% decline in single premium policy insurance in force.
Persistency — the percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 83% as of Jun 30, 2023, up 1100 basis points (bps) year over year.
Primary delinquent loans were 19,880 as of Jun 30, 2023, down 9.1% year over year.
Total expenses increased nearly fourfold year over year to $107.7 million. The expense ratio was 29.6, down 340 bps from the year-ago quarter.
Segmental Update
The Mortgage segment reported a year-over-year decrease of 10% in total revenues to $260.8 million. Net premiums earned by the segment were $210.7 million, down 14.7% year over year. Claims paid were $3 million, flat year over year. The loss ratio was negative 10.3 compared with negative 46.2 in the year-ago quarter.
The homegenius segment’s revenues of $14.8 million decreased 54.2% year over year. Net premiums earned by the segment were $2.7 million, which decreased 61.3% year over year. Adjusted pre-tax operating loss was $24.4 million, wider than the prior-year quarter loss of $17.7 million.
Financial Update
As of Jun 30, 2023, Radian Group had a solid cash balance of $1.3 billion. The debt-to-capital ratio improved 120 bps to 25.3 from the 2022-end level. Book value per share, a measure of net worth, climbed 12% year over year to $26.51 as of Jun 30, 2023.
In the second quarter, adjusted net operating return on equity was 14.1%, which deteriorated 950 bps year over year.
The risk-to-capital ratio of Radian Guaranty as of the second-quarter end was 10.8:1, versus 10.7:1 from the 2022-end level. Excess available resources to support PMIERs of $5.7 billion were 41% higher than Radian Guaranty's minimum required assets.
Share Repurchase and Dividend Update
Radian bought back 0.2 million shares worth $5 million, including commissions, in the second quarter. The remaining repurchase capacity was $280 million as of Jun 30, 2023. The board of directors paid a quarterly dividend of 22.5 cents per share.
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.
VGM Scores
Currently, Radian 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 B on the value side, putting it in the top 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Radian has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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Radian Group Inc. (RDN) : Free Stock Analysis Report
