EMC Insurance Raised to Strong Buy - Analyst Blog

On March 21, Zacks Investment Research upgraded EMC Insurance Group Inc. EMCI to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

EMC Insurance has been witnessing rising earnings estimates on the back of strong fourth-quarter 2013 results and an enhanced guidance for 2014. Moreover, this property and casualty insurer delivered positive earnings surprises in 3 of the last 4 quarters with an average beat of 126.8%. The long-term expected earnings growth rate for this stock is 5%.

EMC Insurance reported fourth-quarter operating net earnings of 95 cents a share, exceeding the Zacks Consensus Estimate by 9.2%. The better-than-expected performance came on the back of improved results at the company's Reinsurance and Property and Casualty Insurance segments.

Revenues of EMC Insurance improved  14.3% year over year on the strength of higher premiums earned across both the Reinsurance (up 38.7% year over year) and Property and Casualty Insurance (up 9.5%) segments. The top line also surpassed the Zacks Consensus Estimate.

Based on projected combined ratio of 96.8% and projected investment income consistent with the 2013 reported number, EMC Insurance expects 2014 operating net earnings to range between $3.00 and $3.25 per share, up from 2013 levels. Growth across the Reinsurance and Property and Casualty Insurance segments is expected to drive results going ahead.

Subsequently, the Zacks Consensus Estimate for 2014 earnings increased 22.4% to $3.00 per share over the last 30 days and is at the lower end of the company's guidance. For 2015 as well, the Zacks Consensus Estimate moved north by 27% to $3.30 per share over the same time frame.

Other Stocks to Consider

Investors interested in the property and casualty industry may consider stocks like Alleghany Corp. Y, AmTrust Financial Services, Inc. AFSI and Atlas Financial Holdings, Inc. AFH. All these stocks hold the same Zacks Rank as EMC Insurance.