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Genworth Financial (GNW) Down 3.9% Since Earnings Report: Can It Rebound?

Published 06/01/2017, 10:01 PM
Updated 07/09/2023, 06:31 AM
GNW
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It has been about a month since the last earnings report for Genworth Financial Inc (NYSE:GNW) . Shares have lost about 3.9% in that time frame, underperforming the market .

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted 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.

Genworth Financial Q1 Earnings Beat, Revenues Miss

Genworth Financial reported first-quarter 2017 net operating income of $0.29 per share that beat the Zacks Consensus Estimate of $0.22 per share by 38.1%. Earnings improved 38% year over year. The bottom line included expenses related to state guaranty fund assessments for the Penn Treaty Network American Insurance Company and American Network Insurance Company (Penn Treaty) plan of liquidation.

The company reported net income per share of 31 cents, skyrocketing 182% from 11 cents earned in the prior-year quarter.

Operational Performance

Total revenue of Genworth improved 18% year over year to $2.137 billion. Increase of 43% in premiums alongside higher net investment income drove the upside. However, decline in policy fees and other income limited the improvement. Also, the top line missed the Zacks Consensus Estimate of $2.180 billion.

Total benefits and expenses increased 12.5% year over year to $1.8 billion, primarily due to an increase in benefits and other changes in policy reserves.

Segment-Wise Quarterly Review

U.S. Mortgage Insurance: Net operating income of $73 million surged 20% year over year. Loss ratio for the quarter improved 700 basis points (bps) year over year to 17%. Continued decline and improved performance in delinquencies during the 2005–2008 book years led to growth.

Canada Mortgage Insurance: Net operating income was $36 million, up 9.1% year over year. Loss ratio in the quarter improved 500 bps year over year to 24%, mainly due to an increase in new delinquencies, net of cures.

Australia Mortgage Insurance: Net operating income of $13 million plunged 31.6% year over year. Loss ratio in the quarter was 35%, up 900 bps year over year. This was due to continued unfavorable experience from the commodity dependent regions of Queensland and Western Australia.

U.S. Life Insurance: Net operating income of $53 million decreased 41.8% year over year. The underperformance stemmed from lower Long Term Care Insurance and Life Insurance.

Runoff: Net operating income of $14 million compared favorably with the net operating income of $4 million in the year-ago quarter.

Corporate And Other: Net operating loss of $46 million was significantly narrower than the year-ago loss of $105 million.

Financial Update

Genworth exited the quarter with cash, cash equivalents and invested assets of $75.4 billion, up about 0.5% from year-end 2016.

Long-term borrowings of Genworth totaled $4.2 billion as of Dec 31, 2016, up approximately 0.3% from year-end 2016.

Book value per share was $25.68 as of Mar 31, 2017, down 8.9% from the 2016-end level.

Business Update

In Oct 2016, Genworth Financial inked a definitive agreement with China Oceanwide Holdings Group Co., Ltd. to be acquired by the latter for $2.7 billion or $5.43 per share in cash. The transaction will be executed via Asia Pacific Global Capital Co. Ltd., one of China Oceanwide's investment platforms. The deal is expected to culminate by the middle of 2017 upon fulfillment of closing conditions. At a special meeting on Mar 7, 2017, Genworth stockholders voted to approve the proposed transaction with Oceanwide.

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last two month period as none of them issued any earnings estimate revisions.

Genworth Financial Inc Price and Consensus

VGM Scores

Currently, Genworth Financial's stock has a poor Growth Score of 'F'. However, its Momentum is doing a bit better with a 'D'. However, the stock was allocated a grade of 'A' on the value side, putting it in the top 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.

Our style scores indicate that the stock is more suitable for value investors than momentum investors.

Outlook

The stock has a Zacks Rank #2 (Buy). We expect above average returns from the stock in the next few months.



Genworth Financial Inc (GNW): Free Stock Analysis Report

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