雅虎香港財經 Travelers (TRV) Stock Rallies 16% YTD: Will the Momentum Last?
Shares of The Travelers Companies, Inc. TRV have gained 15.5% year to date, outperforming the industry’s increase of 13%, the Finance sector’s rise of 3.2% and the Zacks S&P 500 composite index’s rise of 4.7%. With a market capitalization of $50 billion, the average volume of shares traded in the last three months was 1.5 million.
Strong retention rates, positive renewal premium changes, strong returns from the non-fixed income portfolio and sufficient liquidity continue to drive this Zacks Rank #2 (Buy) insurer.
Travelers has a VGM Score of A. VGM Score helps identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results show that stocks with a VGM Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities.
The Zacks Consensus Estimate for Travelers’ 2024 and 2025 earnings has moved 2.6% and 1.7% north, respectively, in the past 30 days, reflecting analysts’ optimism.
Travelers’ return on equity for the trailing 12 months is 13.6%, which compares favorably with the industry’s 7.2%, reflecting the company’s efficiency in utilizing shareholders’ funds. Also, return on invested capital of 7% outperforms the industry average of 5%. This reflects TRV’s efficiency in utilizing funds to generate income.
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Will the Bull Run Continue?
Strong retention rates, positive renewal premium changes and higher new business premiums in both Domestic Automobile and Domestic Homeowners should help drive this property and casualty insurer’s overall premiums. Its focus on implementing pricing and other actions to continue increasing returns and, more importantly, improving profitability bodes well.
Travelers is one of the leading writers of auto and homeowners’ insurance plus commercial U.S. property-casualty insurance. Going by the progress and continued growth of the agency auto and homeowners business, TRV remains optimistic about the trajectory of its personal lines business.
The company’s commercial businesses continue to perform well on the back of stability in the markets where it operates, as well as the execution of its growth strategies. For 2024, the insurer expects renewal premium change to be elevated but moderate into the low-double digits. In Domestic Automobile, TRV expects renewal premium change to remain strong.
Net investment income, an important component of an insurer’s top line, should continue to benefit from higher average levels of invested assets, improved results from the fixed-income portfolio and strong returns from the non-fixed-income portfolio.
In tandem with industry trends, the insurer continues to deploy funds in technology. Balance sheet strength, driven by scale, profitability and cash flow, supports it in investing more than $1 billion annually in technology.
Its long-term financial strategy encompasses delivering improved earnings by generating capital in excess of growth needs, maintaining a balanced approach to rightsizing capital and growing book value per share over time.
Notably, its free cash flow conversion has remained more than 100% over many years, reflecting its solid earnings.
The company has raised dividends for the last 19 years with a compound annual growth rate of 8%. Its current dividend yield of 1.8% is better than the industry average of 0.3%. This makes TRV an attractive pick for yield-seeking investors.
The Zacks Consensus Estimate for Travelers’ 2024 earnings is pegged at $17.68 per share, indicating a 34.6% increase from the year-ago reported figure on 11.8% higher revenues of $46.4 billion. The Zacks Consensus Estimate for Travelers’ 2025 earnings is pegged at $20.11 per share, indicating a 13.8% increase from the year-ago reported figure on 8.3% higher revenues of $50.2 billion. The expected long term earnings growth is pegged at 11.5%, better than the industry average.
This property & casualty insurer has a Value Score of A, reflecting an attractive valuation.
Other Stocks to Consider
Some other top-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited AXS, Mercury General Corporation MCY and Arch Capital Group Ltd. ACGL. While Axis Capital and Mercury General sport a Zacks Rank #1 (Strong Buy) each at present, Arch Capital carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 102.57%. Year to date, the insurer has gained 11.5%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $10.10 and $11.07, respectively, indicating a year-over-year increase of 2.5% and 9.6%.
Mercury General beat estimates in three of the last four quarters and matched in one, the average being 3,417.48%. Year to date, the insurer has rallied 36.1%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 earnings per share is pegged at $2.90 and $3.90, indicating a year-over-year rise of 866.67% and 34.48%, respectively.
Arch Capital has a solid record of beating earnings estimates in each of the trailing four quarters, the average being 27.32%. Year to date, ACGL has jumped 14.9%.
The Zacks Consensus Estimate for the company’s 2024 and 2025 revenues is pegged at $15.52 billion and $16.93 billion, indicating a year-over-year increase of 15% and 9%, respectively.
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The Travelers Companies, Inc. (TRV) : Free Stock Analysis Report
Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Arch Capital Group Ltd. (ACGL) : Free Stock Analysis Report
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