2 Financials That Are No Longer Sells: Macquarie
In separate reports published Wednesday, Macquarie analysts wrote about two Insurance companies that missed expectations in 2Q, while upgrading the ratings for both stocks.
Analyst Amit Kumar upgraded the rating on Allstate Corp (NYSE: ALL) from Underperform to Neutral, while maintaining the price target at $60. The company reported its 2Q op. EPS at $0.63, missing the Macquarie estimate of $1.04 and the consensus expectation of $0.97.
"The miss was attributable to worsening auto loss cost trends due to external factors, such as higher miles driven," Kumar said. The EPS estimates for 2015, 2016 and 2017 have been reduced from $5.55 to $4.75, from $6.05 to $5.40 and from $6.60 to $6.16, respectively.
In response to the miss, Allstate's shares plunged 10.2 percent versus a 0.22 percent decline in the S&P. While stating that the upgrade in rating was based on valuation, the Kumar wrote, "Our bias on ALL remains negative, although we feel that the stock is dead money near term."
Analyst Sean Dargan upgraded the rating on Genworth Financial Inc (NYSE: GNW) from Underperform to Neutral, while maintaining the price target at $7. The company reported its 2Q op. EPS at $0.24, missing the Macquarie estimate of $0.28 and the consensus expectation of $0.26.
The EPS estimate for 2015 has been reduced from $1.10 to $1.05 to reflect the earnings miss in 2Q. The EPS estimates for 2016 and 2017 have been reduced from $1.16 to $1.12 and from $1.38 to $1.35, respectively, "to reflect lower life run-rate earnings," Dargan said.
Dargan noted that the two most important takeaways from the company's release were: "there was no additional long-term care (LTC) charge" and "Genworth believes it is compliant with PMIERs required asset rules in its USMI business via reinsurance plus proceeds from the previously announced Australian company sell-down."
Despite the earnings being missed in 2Q, "nothing in the print materially changed our view of GNW, and at an Aug 4 closing price of $7.02, GNW is close to our target price of $7," the report added.
Latest Ratings for ALL
|Aug 2016||Deutsche Bank||Maintains||Buy|
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