Radian (RDN) Up 0.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Radian (RDN). Shares have added about 0.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Radian due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Radian Group Q2 Earnings Top Estimates, Premiums Rise Y/Y
Radian Group Inc. reported second-quarter 2024 adjusted operating income of 99 cents per share, which beat the Zacks Consensus Estimate by 13.8%. Moreover, the bottom line increased 8.8% year over year. Operating revenues increased 12.3% year over year to $325.6 million due to higher net premiums earned, services revenues and net investment income.
The results reflected solid performance across both Mortgage and All Other segments, higher primary mortgage insurance in force, improved investment income and premiums earned, partially offset by higher expenses.
Quarter in Details
Net premiums earned were $237.7 million, up 11.4% year over year. Net investment income increased 16.4% year over year to $73.7 million. MI New Insurance Written decreased 18% year over year to $13.9 billion. Primary mortgage insurance in force increased 2.2% year over year to $272.8 billion.
Persistency — the percentage of mortgage insurance in force that remains in the company’s books after a 12-month period — was 84% as of Jun 30, 2024, up 100 basis points (bps) year over year.
Primary delinquent loans were 20,276 as of Jun 30, 2024, up 2% year over year. Total expenses increased 10.1% year over year to $133 million. The expense ratio was 28.5, which improved 110 bps from the year-ago quarter.
Segmental Update
The Mortgage segment reported a year-over-year increase of 9.8% in total revenues to $285.9 million. Net premiums earned by the segment were $235 million, up 11.4% year over year. Claims paid were $6 million, which increased 100% year over year. The loss ratio was negative 0.8 compared with negative 10.3 in the year-ago quarter.
The All Other segment reported a year-over-year increase of 33.8% in total revenues to $39.7 million. Net premiums earned by the segment were $2.9 million, up 8% year over year. Net investment income grew 54.8% year over year to $23.6 million. Adjusted pretax operating loss was $6 million, narrower than the year-ago loss of $13.7 million.
Financial Update
As of Jun 30, 2024, Radian Group had a solid cash balance of $13.8 billion. The debt-to-capital ratio deteriorated 80 bps to 25.2 from the 2023-end level. Book value per share, a measure of net worth, climbed 11.9% year over year to $29.66 as of Jun 30, 2024.
In the second quarter, adjusted net operating return on equity was 13.6%, which contracted 50 bps year over year. The risk-to-capital ratio of Radian Guaranty as of the second-quarter end was 10.3:1 compared with 10.4:1 reported at the end of 2023. As of Jun 30, 2024, Radian Guaranty’s Available Assets under PMIERs totaled around $6 billion, which resulted in PMIERs excess Available Assets of $2.2 billion.
Share Repurchase and Dividend Update
In May 2024, the board authorized an increase to its existing share repurchase program from $300 million to $900 million and extended the term to Jun 30, 2026. In the second quarter, Radian repurchased 1.6 million shares worth $50 million, including commissions. As of Jun 30, 2024, purchase authority of up to $667 million remained available under the existing program.
Radian Group paid a dividend totaling $37 million on Jun 20, 2024.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
VGM Scores
At this time, Radian has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, 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 F. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Radian has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Radian belongs to the Zacks Insurance – Multi line industry. Another stock from the same industry, CNO Financial (CNO), has gained 2.5% over the past month. More than a month has passed since the company reported results for the quarter ended June 2024.
CNO reported revenues of $1.07 billion in the last reported quarter, representing a year-over-year change of +4.2%. EPS of $1.05 for the same period compares with $0.54 a year ago.
CNO is expected to post earnings of $0.84 per share for the current quarter, representing a year-over-year change of -4.6%. Over the last 30 days, the Zacks Consensus Estimate has changed +0.8%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for CNO. Also, the stock has a VGM Score of C.
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Radian Group Inc. (RDN) : Free Stock Analysis Report
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