It has been about a month since the last earnings report for Markel (MKL). Shares have lost about 4.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Markel due for a breakout? 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 catalysts.
Markel Incurs Loss in Q4, Revenues Beat Estimates
Markel Corporation (MKL) incurred fourth-quarter 2018 loss of $53.88 per share, against the year-ago quarter’s income of $30.39.
Though the company witnessed higher revenues and improved premiums at the Insurance and Reinsurance segments, an increase in expenses was a bane.
Operational Update
Total operating revenues of $1.9 billion exceeded the Zacks Consensus Estimate by 0.3%. Also, the top line rose 13.4% year over year on higher premiums, investment income, product and services plus other revenues.
Total operating expenses of Markel surged 33.1% year over year to $1.9 billion.
Markel’s combined ratio deteriorated 1300 basis points (bps) year over year to 108% in the reported quarter.
Full-Year Highlights
For 2018, Markel suffered loss of $9.55 per share against the year-ago quarter’s income of $25.81.
Moreover, total operating revenues of $7.3 billion trumped the consensus mark by 1.3% and also improved nearly 20% year over year.
Segment Update
Insurance: Net written premiums were up 14.8% year over year to $968.9 million in the quarter under review.
Underwriting profit came in at $9.5 million that plummeted 91.1% from the year-ago quarter.
Combined ratio deteriorated 1100 bps year over year to 99% in the quarter under discussion.
Reinsurance: Net written premiums rose 11.1% year over year to $87.1 million.
Underwriting loss of $115.3 million was significantly wider than the year-ago quarter’s loss of $49.3 million.
Combined ratio deteriorated 2900 bps year over year to 151% in the fourth quarter.
Financial Update
Markel exited the fourth quarter with investments, cash and cash equivalents plus restricted cash and cash equivalents of 19.2 billion, down 6.5% from the level at year-end 2017.
Debt balance dipped 2.9% to $3 billion as of Dec 31, 2018 from $3.1 billion at 2017 end.
Book value per share declined 4.3% from the tally at year-end 2017 to $653.85 as of Dec 31, 2018.
Net cash from operating activities for the year ended Dec 31, 2018 was $892.9 million, up 4% from that of 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
VGM Scores
At this time, Markel has an average Growth Score of C, a grade with the same score on the momentum front. Following the exact same course, 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 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 this revision looks promising. Notably, Markel has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Markel Corporation (MKL): Free Stock Analysis Report
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