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Should You Dump Genworth Financial (GNW) Stock Now?

Zacks

On Nov 22, 2016, Zacks Investment Research downgraded Genworth Financial, Inc. GNW to a Zacks Rank #5 (Strong Sell).

Why the Downgrade?

Genworth Financial has witnessed sharp downward estimate revisions after reporting disappointing third-quarter 2016 results.

The life insurer’s net operating loss of 81 cents per share in third-quarter 2016 compared unfavorably with the Zacks Consensus Estimate of net operating income of 21 cents per share. Moreover, the company had reported net operating income of 13 cents per share in the prior-year quarter. The dismal results were primarily attributable to the previously announced charges related to the review of Long Term Care (LTC) claim reserves and taxes.

Moreover, the company experienced a slight decline in total revenue due to decrease in premiums, policy fees and other income.

With respect to segmental results, net operating income at the company’s U.S., Canada and Australia businesses significantly deteriorated on a year-over-year basis. Moreover, U.S. Life Insurance segment incurred net operating loss of $207 million in the third quarter, which compared unfavorably with the net operating income of $40 million in the prior-year quarter. The underperformance resulted from the net operating loss incurred by LTC Insurance.

Loss ratios of LTC Insurance business have been deteriorating over the last few years and the third quarter was no exception. Loss ratio from LTC Insurance business came in at 146%, up from 70% in the second quarter.

The Zacks Consensus Estimate for 2016 moved down to a loss of 15 cents per share from earnings of 87 cents, over the last 30 days. For 2017, the same moved down 2.2% to 88 cents per share over the last 30 days.

With respect to the surprise trend, the company has delivered negative surprises in two of the last four quarters, with an average miss of 149.40%.

GENWORTH FINL Price and Consensus


GENWORTH FINL Price and Consensus | GENWORTH FINL Quote

Stocks to Consider

Some better-ranked stocks from the same space include Health Insurance Innovations, Inc. HIIQ, Primerica, Inc. PRI and Universal American Corp. UAM.

Health Insurance Innovations works as a developer, distributor, and administrator of cloud-based individual health and family insurance plans, and supplemental products in the United States. The company delivered positive surprises in all of the last four quarters with an average beat of 270.84%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Primerica operates as a distributor of financial products to middle-income households in the United States and Canada. The company delivered positive surprises in all of the last four quarters with an average beat of 6.37%. The company holds a Zacks Rank #2 (Buy).

Universal American Corp offers health insurance and managed care products and services to Medicare and Medicaid customers across the United States. The company delivered positive surprises in one of the last four quarters but with an average miss of 231.25%. The company holds a Zacks Rank #2.

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