It has been about a month since the last earnings report for Radian (RDN). Shares have added about 2.1% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Radian Group Q3 Earnings Beat Estimates on Higher Revenues
Radian Group Inc. reported third-quarter 2024 adjusted operating income of $1.03 per share, which beat the Zacks Consensus Estimate by 17%. However, the bottom line decreased 0.9% year over year. Operating revenues increased 2.6% year over year to $319 million due to higher net investment income. The metric missed the Zacks Consensus Estimate by 0.3%.
The results reflected solid performance in the All Other segment, higher primary mortgage insurance in force and improved investment income, partially offset by higher expenses and poor performance in the Mortgage segment.
Quarter in Details
Net premiums earned were $235 million, down 0.8% year over year. Net investment income increased 15.6% year over year to $78.3 million. MI New Insurance Written decreased 3% year over year to $13.5 billion. Primary mortgage insurance in force increased 1.9% year over year to $274.7 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 Sept. 30, 2024, which remained unchanged year over year. Primary delinquent loans were 22,350 as of Sept. 30, 2024, up 9.5% year over year. Total expenses increased 24% year over year to $138.4 million. The expense ratio was 23.7, down 30 bps from the year-ago quarter.
Segmental Update
The Mortgage segment reported a year-over-year decrease of 0.2% in total revenues to $287.6 million. Net premiums earned by the segment were $235.1 million, down 0.6% year over year. Claims paid were $3 million, which decreased 40% year over year. The loss ratio was positive 2.7 against negative 3.5 in the year-ago quarter.
The All Other segment reported a year-over-year increase of 22.5% in total revenues to $39.6 million. Net premiums earned by the segment were $3.9 million, up 15.2% year over year. Net investment income grew 58% year over year to $28.1 million. Adjusted pretax operating loss was $4.8 million, narrower than the year-ago loss of $8.7 million.
Financial Update
As of Sept. 30, 2024, Radian Group reported a solid cash balance of $28 million, reflecting an increase of 47.6% from the 2023-end level. The debt-to-capital ratio improved 590 bps to 18.5 from the 2023-end level. Book value per share, a measure of net worth, climbed 17.5% year over year to $31.37 as of Sept. 30, 2024.
In the third quarter, adjusted net operating return on equity was 13.7%, which deteriorated 230 bps year over year. As of Sept. 30, 2024, Radian Guaranty’s Available Assets under PMIERs totaled approximately $6 billion, resulting in PMIERs excess Available Assets of $2.1 billion.
Share Repurchase and Dividend Update
Radian bought back 1.5 million shares worth $49 million, including commissions, in the third quarter. The remaining repurchase capacity was $618 million as of Sept. 30, 2024. The board of directors paid a quarterly dividend of 24.5 cents per share.
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.
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
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 is part of the Zacks Insurance - Multi line industry. Over the past month, MGIC Investment (MTG), a stock from the same industry, has gained 4.6%. The company reported its results for the quarter ended September 2024 more than a month ago.
MGIC reported revenues of $306.07 million in the last reported quarter, representing a year-over-year change of +3%. EPS of $0.77 for the same period compares with $0.64 a year ago.
For the current quarter, MGIC is expected to post earnings of $0.65 per share, indicating a change of -3% from the year-ago quarter. The Zacks Consensus Estimate has changed -1% over the last 30 days.
MGIC has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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Radian Group Inc. (RDN) : Free Stock Analysis Report
MGIC Investment Corporation (MTG) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
