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Why Is W.R. Berkley (WRB) Up 7.5% Since the Last Earnings Report?
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A month has gone by since the last earnings report for W.R. Berkley Corporation (WRB - Free Report) . Shares have added about 7.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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.
W.R. Berkley Q4 Earnings Miss Estimates, Down Y/Y
W.R. Berkley’s fourth-quarter 2016 operating income of $0.82 per share missed the Zacks Consensus Estimate of $0.83 by 1.2%. Moreover, the bottom line deteriorated 7.9% year over year.
Increase in revenues was offset by the rise in expenses, which led to the underperformance. Nonetheless, the company witnessed improved investment results in the quarter. The underlying loss ratio remained stable.
Including net investment gains, net income came in at $1.20 per share, up 41.2% year over year.
Full-Year Highlights
W.R. Berkley’s 2016 operating income of $3.40 per share missed the Zacks Consensus Estimate of $3.42. Earnings declined 0.9% year over year. Net income of $4.68 climbed 20.9% year over year.
Revenues of $6.9 billion improved 4.6% year over year.
Behind Q4 Headlines
W.R. Berkley’s net written premiums for the quarter were $1.5 billion, up 0.7% year over year. Higher premiums written at the Insurance segment resulted in the improvement.
Operating revenues came in at $1.78 billion, up 6.5% year over year. The top line also beat the Zacks Consensus Estimate of 1.75 billion.
Investment income jumped 24.8% year over year.
Total expenses increased 5.1% to $1.7 billion, primarily due to higher losses and loss expenses, interest expenses as well as other operating costs and expenses.
Consolidated combined ratio (a measure of underwriting profitability) deteriorated 180 basis points (bps) year over year to 94.9%.
Segment Details
Net premiums written in the Insurance segment inched up 0.9% year over year to $1.4 billion in the quarter. The increase was mainly driven by higher premiums written under other liability, worker’ compensation, short-tail lines, and professional liability. Combined ratio in this segment deteriorated 120 bps year over year to 93.9%.
Net premiums written in the Reinsurance segment dipped 1.2% year over year to $144.6 million due to lower premiums written under casualty reinsurance. Combined ratio deteriorated 690 bps to 103.4%.
Financial Update
W.R. Berkley exited the fourth quarter with total assets worth $23.4 billion, up 7.5% from year-end 2015.
Book value per share increased 11.6% from year-end 2015 to $41.65 as of Dec 31, 2016.
Cash flow from operations plunged 53.3% year over year to $121.9 million.
The company’s return on equity improved 370 bps to 13.3%.
Capital Deployment
In 2016, W.R. Berkley deployed $316 million via share repurchases of $132 million as well as special and ordinary dividends of $184 million.
Business Update
During the fourth quarter, the property and casualty (P&C) insurer established two businesses – Berkley Cyber Risk Solutions and Berkley Transactional.
In addition, the sale of a portion of the company’s investment in HealthEquity, Inc. resulted in realized pre-tax gain of $68 million and pre-tax unrealized gain, recognized in equity, of $351 million on its remaining shares.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been four downward revisions for the current quarter. While looking back an additional 30 days, we can see even more downward movement. There have been three downward revisions in the last two months.
At this time, W.R. Berkley's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #5 (Strong Sell). We are looking for below average return from the stock in the next few months.
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Why Is W.R. Berkley (WRB) Up 7.5% Since the Last Earnings Report?
A month has gone by since the last earnings report for W.R. Berkley Corporation (WRB - Free Report) . Shares have added about 7.5% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock’s next earnings release, or is it due for a pullback? 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.
W.R. Berkley Q4 Earnings Miss Estimates, Down Y/Y
W.R. Berkley’s fourth-quarter 2016 operating income of $0.82 per share missed the Zacks Consensus Estimate of $0.83 by 1.2%. Moreover, the bottom line deteriorated 7.9% year over year.
Increase in revenues was offset by the rise in expenses, which led to the underperformance. Nonetheless, the company witnessed improved investment results in the quarter. The underlying loss ratio remained stable.
Including net investment gains, net income came in at $1.20 per share, up 41.2% year over year.
Full-Year Highlights
W.R. Berkley’s 2016 operating income of $3.40 per share missed the Zacks Consensus Estimate of $3.42. Earnings declined 0.9% year over year. Net income of $4.68 climbed 20.9% year over year.
Revenues of $6.9 billion improved 4.6% year over year.
Behind Q4 Headlines
W.R. Berkley’s net written premiums for the quarter were $1.5 billion, up 0.7% year over year. Higher premiums written at the Insurance segment resulted in the improvement.
Operating revenues came in at $1.78 billion, up 6.5% year over year. The top line also beat the Zacks Consensus Estimate of 1.75 billion.
Investment income jumped 24.8% year over year.
Total expenses increased 5.1% to $1.7 billion, primarily due to higher losses and loss expenses, interest expenses as well as other operating costs and expenses.
Consolidated combined ratio (a measure of underwriting profitability) deteriorated 180 basis points (bps) year over year to 94.9%.
Segment Details
Net premiums written in the Insurance segment inched up 0.9% year over year to $1.4 billion in the quarter. The increase was mainly driven by higher premiums written under other liability, worker’ compensation, short-tail lines, and professional liability. Combined ratio in this segment deteriorated 120 bps year over year to 93.9%.
Net premiums written in the Reinsurance segment dipped 1.2% year over year to $144.6 million due to lower premiums written under casualty reinsurance. Combined ratio deteriorated 690 bps to 103.4%.
Financial Update
W.R. Berkley exited the fourth quarter with total assets worth $23.4 billion, up 7.5% from year-end 2015.
Book value per share increased 11.6% from year-end 2015 to $41.65 as of Dec 31, 2016.
Cash flow from operations plunged 53.3% year over year to $121.9 million.
The company’s return on equity improved 370 bps to 13.3%.
Capital Deployment
In 2016, W.R. Berkley deployed $316 million via share repurchases of $132 million as well as special and ordinary dividends of $184 million.
Business Update
During the fourth quarter, the property and casualty (P&C) insurer established two businesses – Berkley Cyber Risk Solutions and Berkley Transactional.
In addition, the sale of a portion of the company’s investment in HealthEquity, Inc. resulted in realized pre-tax gain of $68 million and pre-tax unrealized gain, recognized in equity, of $351 million on its remaining shares.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been four downward revisions for the current quarter. While looking back an additional 30 days, we can see even more downward movement. There have been three downward revisions in the last two months.
W.R. Berkley Corporation Price and Consensus
W.R. Berkley Corporation Price and Consensus | W.R. Berkley Corporation Quote
VGM Scores
At this time, W.R. Berkley's stock has a subpar Growth Score of 'D', a grade with the same score on the momentum front. Following the exact same course, the stock was also 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 'D'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #5 (Strong Sell). We are looking for below average return from the stock in the next few months.