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Why Is Markel Group (MKL) Up 1.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Markel Group (MKL - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Markel Group 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.

Markel's Q2 Earnings Beat Estimates, Revenues Miss

Markel Group Inc. reported second-quarter 2024 net operating earnings per share of $25.95, which beat the Zacks Consensus Estimate by 25%. The bottom line increased 15.7% year over year. Markel witnessed improved earned premiums and increased net investment income.

Quarterly Operational Update   

Total operating revenues of $3.8 billion missed the Zacks Consensus Estimate by 0.6%. The top line, however, rose 4.7% year over year. Earned premiums increased 2.3% to $2.1 billion in the reported quarter.

Net investment income increased 31.4% year over year to $223 million in the second quarter. Total operating expenses increased 3.8% to $3.3 billion, owing to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses, product expenses, and services and other expenses. MKL’s combined ratio deteriorated 70 basis points (bps) year over year to 93.5 in the reported quarter.

Segment Update

Insurance: Gross premiums increased 2% year over year to $2.5 billion. The uptick was driven by new business growth and more favorable rates within personal lines, programs, marine and energy and property product lines.  Underwriting profit came in at $133 million, down 1% year over year. The combined ratio deteriorated 30 bps year over year to 92.9 

Reinsurance: Gross premiums increased 50% year over year to $420.7 billion. The increase can be attributed to the impact of favorable timing differences and increases in renewals due to increased participation within professional liability product lines. Underwriting profit was $1.3 million, down 91% year over year. The combined ratio deteriorated 520 bps year over year to 99.5 in the second quarter of 2024. 

Markel Ventures: Operating revenues of $1.5 billion improved 5% year over year. The growth was driven by higher revenues across many of its product businesses due in part to increased demand.

Operating income of $177.5 million increased 4% year over year, driven by the positive impact of consumer and building products businesses, which witnessed higher revenues and operating margins as a result of declines in the cost of materials, freight and labor.

Financial Update

Markel exited the second quarter of 2024 with cash and cash equivalents of $4.2 billion, down 2.7% from the 2023 end level.  The debt balance increased 16.4% year over year to $4.4 billion as of Jun 30, 2024 from 2023 end level. 

Shareholders' equity was $15.8 billion at second-quarter 2024 end, up 5.8% from 2023 end. Net cash provided by operating activities was $1.2 billion in the first half, up 19.9% year over year, reflecting higher net premium collections.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Markel Group has a subpar Growth Score of D, a grade with the same score on the momentum front. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Markel Group 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

Markel Group belongs to the Zacks Diversified Operations industry. Another stock from the same industry, 3M (MMM - Free Report) , has gained 5.1% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.

3M reported revenues of $6.26 billion in the last reported quarter, representing a year-over-year change of -24.9%. EPS of $1.93 for the same period compares with $2.17 a year ago.

For the current quarter, 3M is expected to post earnings of $1.92 per share, indicating a change of -28.4% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

3M has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of F.


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