January 26, 2022

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Why Is Markel (MKL) Up 1.1% Since Last Earnings Report?

It has been about a month since the last earnings report for Markel (MKL). Shares have added about 1.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Markel due for a pullback? 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 Q4 Earnings and Revenues Miss Estimates, Up Y/Y

Markel Corporation’s  fourth-quarter 2019 earnings of $6.57 per share, missed the Zacks Consensus Estimate by 7.1% but were up 189.4% year over year.

The company witnessed year-over-year growth owing to strong contribution from its insurance and Markel Ventures. The acquisition of VSC Fire & Security aided Markel Ventures results.

Operational Update

Total operating revenues of $2.05 billion missed the Zacks Consensus Estimate by 0.8%. The top line rose 8.9% year over year on higher premiums, product and services plus other revenues, partly offset by lower net investment income.

Total operating expenses of Markel declined 7.5% year over year to $1.83 billion.

Markel’s combined ratio improved 1500 basis points (bps) year over year to 93% in the reported quarter.

Segment Update

Insurance: Net written premiums were up 17.5% year over year to $1.14 billion in the quarter under review.

Underwriting profit came in at $128.8 million, compared with $9.5 million in the year-ago quarter.

Combined ratio improved 100 bps year over year to 89% in the quarter under discussion.

Reinsurance: Net written premiums increased 37.8% year over year to $120 million.

Underwriting loss was $45.7 million, narrower than $115.3 million incurred in the year-ago quarter.

Combined ratio improved 3100 bps year over year to 120% in the fourth quarter.

Markel Ventures: Profit of $21.4 million increased 25.3% year over year.

Financial Update

Markel exited the fourth quarter with investments, cash and cash equivalents and restricted cash and cash equivalents (invested assets) of $22.3 billion at Dec 31, 2019, up 16.14% year over year.

Debt balance increased 17.4% year over year to $3.53 billion as of Dec 31, 2019.

Book value per share increased 22.7% from year-end 2018 to $802.59 as of Dec 31, 2019.

Net cash from operating activities was $1.3 billion in 2019, up 45.7% year over year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Markel has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 B. If you aren’t focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Markel has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.

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