Shares of W.R. Berkley Corp. WRB have been on an uptrend (gaining 10.6%) since the company announced a special dividend on Nov 4. In fact, the share price hit a new 52-week high of $62.15 on Nov 28. About 0.4 million shares exchanged hands in the last trading session and the stock finally closed at $61.96.
Why the Stock Should Be in Your Portfolio
W.R. Berkley’s revenues have been consistently increasing and growing at a 10-year CAGR of 3.7%. Sustained premium growth over the past several quarters, mainly owing to its startup units, drove the upside. In addition to the startup units, W.R. Berkley’s international business has also seen consistent premium growth over many years.
Premium growth in the international unit is mainly supported by emerging markets of the United Kingdom, Continental Europe, South America, Canada, Scandinavia, Asia and Australia. W.R. Berkley’s impressive profile and rate increases bode well for continued revenue growth.
W.R. Berkley has been deploying capital effectively in shareholder-friendly moves. While the 8% dividend increase this May marks the 12th consecutive increase since 2005, a special dividend announcement this November was the second special dividend approval in 2016. This will be the fourth time that the company will be paying a special dividend since 2011. Given W.R. Berkley a solid balance sheet with sufficient liquidity and strong cash flows, the company is well positioned to enhance shareholders value going forward.
Valuation is also attractive at present as the stock is currently trading at a forward P/E of 18.0x, a 36.4% discount to the industry average of 28.3x. Reinsurance Group has a trailing 12-month return on equity (ROE) of 9.3%, higher than the industry average of 7%.
Shares of W.R. Berkley gained 13.32% year to date compared with 17.23% growth for the Zacks-categorized Property and Casualty industry. Nonetheless, we believe the above-mentioned growth drivers will help the stock turn around. Investors should note that W.R. Berkley has returned more than S&P 500.
Also, this Zacks Rank #3 (Hold) insurer has delivered positive surprise in three of the last four quarters with an average beat of 3.8%. The long-term expected earnings growth is pegged at 9%. The company has seen its 2016 estimates moving north by more than 1% over the last 60 days.
BERKLEY (WR) CP Price and Consensus
Stocks to Consider
Some better-ranked property and casualty (P&C) insurers are Alleghany Corp. Y, Arch Capital Group Ltd. ACGL and First American Financial Corp. FAF. All of these stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany, which is engages in P&C reinsurance and insurance businesses in the U.S. and internationally, beat estimates in three of the last four quarters with an average positive surprise of 20.52%.
Arch Capital, a provider of property, casualty, and mortgage insurance and reinsurance products worldwide surpassed estimates in the last four quarters with an average positive surprise of 9.27%.
First American Financial, a provider of financial services, surpassed estimates in the last four quarters with an average positive surprise of 14.32%.
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