Hallmark Upped to Strong Buy - Analyst Blog

On May 15, 2014, Zacks Investment Research upgraded Hallmark Financial Services Inc. HALL to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Hallmark has been witnessing rising earnings estimates on the back of strong first-quarter 2014 results reported on May 8, surpassing the Zacks Consensus Estimate by a massive 360%. This drove a bullish sentiment on the stock, leading to a 100% increase in the Zacks Consensus Estimate for full-year 2014 to 30 cents per share over the last 7 days. Moreover, this property and casualty insurer has delivered positive earnings surprises in the last three quarters with an average beat of almost 160%.

Apart from beating the Zacks Consensus Estimate, earnings improved almost 156% year over year. Growth across the profitable and contracting lines of businesses mainly led to the upside.

Although the top line suffered a decline, it was mitigated by decreases in loss and loss adjustment expenses as well as other operating expenses, leading to margin expansion.

Additionally, the first quarter marked the third consecutive quarter of underwriting profits for Hallmark, mainly attributable to a solid performance by the Specialty Commercial segment. In fact, this segment has been delivering outstanding results over the past three years. The financial position of the company also remained strong after the first quarter with an increase in book value, cash and cash equivalents and total assets.

Other Stocks to Consider

Other players in the property and casualty insurance space that look attractive at current levels include Alleghany Corp. Y, Endurance Specialty Holdings Inc. ENH and AmTrust Financial Services Inc. AFSI. While AmTrust and Endurance Specialty sport the same Zacks Rank as Hallmark, Alleghany carries a Zacks Rank #2 (Buy).
 

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