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Why Is American Financial (AFG) Up 3.9% Since the Last Earnings Report?
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A month has gone by since the last earnings report for American Financial Group, Inc. (AFG - Free Report) . Shares have added about 3.9% in that time frame, underperforming 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 drivers.
American Financial Beats on Q4 Earnings & Revenues
American Financial Group, Inc.'s fourth-quarter 2016 net operating earnings of $1.98 per share surpassed the Zacks Consensus Estimate of $1.62 by 22.2%. Further, earnings improved about 30% year over year. Notably, the company’s fourth-quarter net operating earnings of $1.98 per share marked an all-time high for American Financial’s core quarterly earnings per share (EPS).
The year-over-year bottom-line growth can be attributed to higher underwriting profit at Specialty Property and Casualty (P&C) insurance segment and significantly higher operating earnings in Annuity Segment.
Including realized gains of $0.36, tax benefit related to National Interstate merger of $0.74 and tax benefit related to Neon restructuring, net income per share skyrocketed 198.6% year over year to $4.33 from $1.45 per share.
2016 Highlights
American Financial reported full-year net operating earnings per share of $6.03, up 10.8% year over year.
American Financial's total operating revenue of $6.3 billion inched up 1.1% year over year on the back of higher P&C insurance net earned premiums as well as an increase in net investment income.
Behind the Headlines
Total operating revenue of $1.6 billion inched up 0.8% year over year. The top line growth can be attributed to higher net investment income and P&C insurance net earned premiums. Moreover, the top line outpaced the Zacks Consensus Estimate of $1.2 billion by 35.4%.
Net investment income of $429 million grew about 3% year over year.
American Financial's total cost and expenses of $1.4 billion were up 0.9% year over year. Higher losses and expenses in the P&C segment, expenses of managed investment entities, and other expenses resulted in the overall increase in expenses.
Segment Results
Specialty P&C generated $1.1 billion in net premiums written, up 2.6% year over year. Increase in net premiums written in the Property & Transportation (up 4.2% year over year), Specialty Casualty (1.2%), Specialty Financial (1.3%) and Other (8.7%) resulted in the improvement.
Underwriting profit of the segment increased 10% to $110 million. The improvement can primarily be attributable to higher underwriting profit at Property and Transportation and Specialty Financial segments. However, lower underwriting profit at Specialty Casualty segment partially offset the upside. The segment's combined ratio improved 60 basis points (bps) year over year to 90.4%, on the back of 850 bps and 270 bps improvement in combined ratio in Property & Transportation and Specialty Financial segments, respectively.
The Annuity segment reported $1.1 billion in total premiums written, up 0.4% year over year.
Financial Update
As of Dec 31, 2016, American Financial had cash and investments of $41.4 billion, up 9.8% from the 2015-end level of $37.7 billion.
Long-term debt jumped 28.6% year over year to $1.3 billion. As of Dec 31, 2016, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $53.11, up 7.7% from the 2015-end level.
The company reported return on equity (ROE) of 14.8% in 2016 compared with 8.3% in the 2015.
Dividend and Share Buyback Update
During 2016, American Financial repurchased 1.9 million shares of common stock worth $133 million, at an average price per share of $73.98.
In the quarter under review, the board of directors of the company declared a special cash dividend of $1.00 per share. Notably, in the past year, the company has increased quarterly dividend by 12%.
2017 Guidance
American Financial projects core net operating earnings per share guidance in the range of $6.20–$6.70.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
American Financial Group, Inc. Price and Consensus
Currently, American Financial's stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile 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.
Our style scores indicate that the stock is equally suitable for value and momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting inline return from the stock in the next few months.
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Why Is American Financial (AFG) Up 3.9% Since the Last Earnings Report?
A month has gone by since the last earnings report for American Financial Group, Inc. (AFG - Free Report) . Shares have added about 3.9% in that time frame, underperforming 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 drivers.
American Financial Beats on Q4 Earnings & Revenues
American Financial Group, Inc.'s fourth-quarter 2016 net operating earnings of $1.98 per share surpassed the Zacks Consensus Estimate of $1.62 by 22.2%. Further, earnings improved about 30% year over year. Notably, the company’s fourth-quarter net operating earnings of $1.98 per share marked an all-time high for American Financial’s core quarterly earnings per share (EPS).
The year-over-year bottom-line growth can be attributed to higher underwriting profit at Specialty Property and Casualty (P&C) insurance segment and significantly higher operating earnings in Annuity Segment.
Including realized gains of $0.36, tax benefit related to National Interstate merger of $0.74 and tax benefit related to Neon restructuring, net income per share skyrocketed 198.6% year over year to $4.33 from $1.45 per share.
2016 Highlights
American Financial reported full-year net operating earnings per share of $6.03, up 10.8% year over year.
American Financial's total operating revenue of $6.3 billion inched up 1.1% year over year on the back of higher P&C insurance net earned premiums as well as an increase in net investment income.
Behind the Headlines
Total operating revenue of $1.6 billion inched up 0.8% year over year. The top line growth can be attributed to higher net investment income and P&C insurance net earned premiums. Moreover, the top line outpaced the Zacks Consensus Estimate of $1.2 billion by 35.4%.
Net investment income of $429 million grew about 3% year over year.
American Financial's total cost and expenses of $1.4 billion were up 0.9% year over year. Higher losses and expenses in the P&C segment, expenses of managed investment entities, and other expenses resulted in the overall increase in expenses.
Segment Results
Specialty P&C generated $1.1 billion in net premiums written, up 2.6% year over year. Increase in net premiums written in the Property & Transportation (up 4.2% year over year), Specialty Casualty (1.2%), Specialty Financial (1.3%) and Other (8.7%) resulted in the improvement.
Underwriting profit of the segment increased 10% to $110 million. The improvement can primarily be attributable to higher underwriting profit at Property and Transportation and Specialty Financial segments. However, lower underwriting profit at Specialty Casualty segment partially offset the upside. The segment's combined ratio improved 60 basis points (bps) year over year to 90.4%, on the back of 850 bps and 270 bps improvement in combined ratio in Property & Transportation and Specialty Financial segments, respectively.
The Annuity segment reported $1.1 billion in total premiums written, up 0.4% year over year.
Financial Update
As of Dec 31, 2016, American Financial had cash and investments of $41.4 billion, up 9.8% from the 2015-end level of $37.7 billion.
Long-term debt jumped 28.6% year over year to $1.3 billion. As of Dec 31, 2016, the company’s book value per share (excluding unrealized gains/losses on fixed maturities) was $53.11, up 7.7% from the 2015-end level.
The company reported return on equity (ROE) of 14.8% in 2016 compared with 8.3% in the 2015.
Dividend and Share Buyback Update
During 2016, American Financial repurchased 1.9 million shares of common stock worth $133 million, at an average price per share of $73.98.
In the quarter under review, the board of directors of the company declared a special cash dividend of $1.00 per share. Notably, in the past year, the company has increased quarterly dividend by 12%.
2017 Guidance
American Financial projects core net operating earnings per share guidance in the range of $6.20–$6.70.
How Have Estimates Been Moving Since Then?
Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.
American Financial Group, Inc. Price and Consensus
American Financial Group, Inc. Price and Consensus | American Financial Group, Inc. Quote
VGM Scores
Currently, American Financial's stock has a subpar Growth Score of 'D', however its Momentum is doing a lot better with a 'B'. Charting a somewhat similar path, the stock was allocated a grade of 'B' on the value side, putting it in the second quintile 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.
Our style scores indicate that the stock is equally suitable for value and momentum investors.
Outlook
The stock has a Zacks Rank #3 (Hold). We are expecting inline return from the stock in the next few months.