On Tuesday, Evercore ISI updated its outlook on shares of Palomar Holdings (NASDAQ:PLMR), increasing the price target to $99 from the previous $90 while maintaining an In Line rating for the stock. The adjustment follows Palomar's recent financial performance, which showed substantial growth and better-than-expected expense ratio leverage.
This was attributed to a higher retained premium that helped to balance a slight miss in the loss ratio, which was impacted by higher natural catastrophe losses and an unfavorable ultimate loss ratio (ULR).
The report detailed that despite the loss ratio not meeting the forecast, with actual figures at 24.9% compared to the predicted 24.1% by Evercore ISI and 23.9% by consensus, the overall results were strong. The company also experienced $2.9 million in favorable prior year development (PYD), which, if excluded, would indicate an even larger miss in the accident year loss ratio (AYLR).
The firm's forward-looking analysis expects Palomar to outperform previous estimates for the second half of 2024 by 8%. This optimistic projection persists despite anticipating larger-than-expected losses of $5-7 million from Hurricanes Beryl and Debbie, which could potentially surprise some market watchers. Evercore ISI had previously estimated $12 million in catastrophe losses for the third quarter.
Evercore ISI has revised its forward estimates for Palomar upwards by 7-9%, taking into account the company's guidance which includes higher retained premiums and expense leverage extending into 2025. This revision also reflects a modest increase in the loss ratio. The new price target of $99 is set with a 12-month forward horizon, indicating confidence in Palomar's continued performance.
In other recent news, Palomar Holdings has seen a series of positive adjustments from various analyst firms following the company's updated guidance and successful reinsurance program renewal.
Keefe, Bruyette & Woods maintained an Outperform rating while raising the stock's price target to $96, following Palomar's increased 2024 operating income guidance to a range of $122-128 million. The firm also revised its earnings per share (EPS) estimates for 2024 and 2025 to $4.60 and $5.70, respectively.
Piper Sandler also raised its price target for Palomar to $99, reaffirming an Overweight rating due to the company's favorable reinsurance pricing. Truist Securities increased its shares target to $100, sustaining a Buy rating and raising the 2024 and 2025 EPS forecast to $4.65 and $5.50, respectively.
Evercore ISI updated its outlook, increasing the price target to $89 while maintaining an In Line rating, reflecting a positive perspective on the company's renewals and better-than-expected pricing. Finally, Piper Sandler increased Palomar's price target to $90, maintaining an Overweight rating, following the company's first-quarter earnings that surpassed expectations. These are the recent developments for Palomar Holdings.
InvestingPro Insights
As Palomar Holdings (NASDAQ:PLMR) continues to navigate the challenges and opportunities within the insurance sector, InvestingPro data and tips provide a deeper understanding of the company's financial health and market position. The company's market capitalization stands at a robust $2.2 billion, reflecting investor confidence in its business model.
With a Price/Earnings (P/E) ratio of 24.35, Palomar trades at a valuation that suggests investors are optimistic about its near-term earnings growth. This is further supported by a PEG ratio of 0.4 for the last twelve months as of Q1 2024, indicating potential undervaluation relative to its earnings growth rate.
Revenue growth remains a strong suit for Palomar, with a notable increase of 19.84% over the last twelve months as of Q1 2024. This growth momentum is evident in the quarterly figure as well, with a 32.88% surge in revenue for Q1 2024. The company's profitability is underscored by an operating income margin of 29.33%, a testament to its efficient operations and cost management.
InvestingPro Tips highlight that Palomar's cash flows can sufficiently cover interest payments, a reassuring sign of financial stability. Additionally, analysts predict the company will be profitable this year, aligning with the positive sentiment reflected in the recent price target update by Evercore ISI.
However, it is worth noting that Palomar does not pay a dividend to shareholders, which may influence investment decisions for those seeking regular income. For those looking to delve deeper into Palomar's financials and market potential, InvestingPro offers additional insights and tips, with 10 more tips available on their website.
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