Why Is Palomar (PLMR) Up 5.5% Since Last Earnings Report?
It has been about a month since the last earnings report for Palomar (PLMR). Shares have added about 5.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Palomar 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.
Palomar Q2 Earnings Top Estimates on Improved Premiums
Palomar Holdings, Inc. reported second-quarter 2024 operating income of $1.25 per share, which beat the Zacks Consensus Estimate by 11.6%. The bottom line increased 45.3% year over year. Palomar witnessed higher premiums, improved adjusted underwriting income and higher yields on invested assets, partly offset by higher losses and loss adjustment expenses, as well as underwriting expenses.
Behind the Headlines
Total revenues improved 47.2% year over year to $131 million, mainly attributable to higher premiums, commission and other income and net investment income. The top line beat the Zacks Consensus Estimate by 9.2%.
Gross written premiums increased 40.4% year over year to $385.2 million. Our estimate was $362.7 million. Net earned premiums increased 47.1% year over year to $122.3 million. Our estimate was $109.2 million. The Zacks Consensus Estimate is pegged at $117.7 million.
Net investment income increased 43.7% year over year to $8 million, driven by higher yields on invested assets and a higher average balance of investments held during the three months ended Jun 30, 2024, due to cash generated from operations. The Zacks Consensus Estimate is pegged at $8.2 million. Our estimate was $8.9 million.
Palomar recorded an underwriting income of $25.6 million, which increased 47% from the year-ago quarter’s income of $17.4 million. Our estimate was $23.2 million. Adjusted underwriting income was $32.9 million, up 42.5% year over year.
Total expenses of $97.6 million increased 45% year over year due to higher losses and loss adjustment expenses, underwriting expenses and acquisition expenses, net of ceding commissions and fronting fees. Our estimate was $87.2 million. The loss ratio was 24.9, which deteriorated 340 basis points (bps) year over year. Our estimate was 23.2. The Zacks Consensus Estimate was pegged at 24.7.
Adjusted combined ratio, excluding catastrophe losses, deteriorated 90 bps year over year to 73.1. The Zacks Consensus Estimate was pegged at 75.8.
Financial Update
Cash and cash equivalents decreased 7.1% from 2023-end to $47.8 million at the end of the second quarter of 2024. Shareholder equity increased 13% from 2023-end to $532.6 million at the end of the reported quarter. Annualized adjusted return on equity in the second quarter of 2024 was 24.7%, expanding 340 bps year over year.
2024 View
Palomar expects adjusted net income in the range of $124-$130 million. This range includes $6.8 million of catastrophe losses incurred during the six months ended Jun 30, 2024, and additional catastrophe losses incurred during the third quarter of 2024 of nearly $5-$7 million related to Hurricanes Beryl and Debby.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a flat trend in estimates revision.
VGM Scores
Currently, Palomar has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. However, the stock was allocated a grade of F on the value side, putting it in the lowest quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Palomar has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Palomar belongs to the Zacks Insurance - Property and Casualty industry. Another stock from the same industry, Axis Capital (AXS), has gained 10.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
Axis Capital reported revenues of $1.5 billion in the last reported quarter, representing a year-over-year change of +6.8%. EPS of $2.93 for the same period compares with $2.23 a year ago.
Axis Capital is expected to post earnings of $2.31 per share for the current quarter, representing a year-over-year change of -1.3%. Over the last 30 days, the Zacks Consensus Estimate has changed +1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Axis Capital. Also, the stock has a VGM Score of B.
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