Markel Group (MKL) Up 2.8% Since Last Earnings Report: Can This Continue?

About a month has passed since the last results report of the Markel Group (MKL). Shares rose about 2.8% in that time, underperforming the S&P 500.

Will the recent positive trend continue until the next earnings release, or is the Markel Group at risk of slowing down? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

Markel earnings for the first quarter, revenues not in line with estimates, increase y/y

Markel Group reported first-quarter 2024 net operating earnings per share of $18.17, missing the Zacks Consensus Estimate by 1.8%. However, the financial result increased by 4.7% year on year.

Markel saw an improvement in earned premiums and an increase in net investment income.

Quarterly operational update

Total operating revenues of $3.6 billion missed the Zacks Consensus Estimate by 1.5%. The value of revenues increased by 9% year on year.

In the reported quarter, earned premiums increased 8.1% to $2.1 billion.

Net investment income increased 37% year-over-year to $218 million in the fourth quarter.

Total operating expenses increased 8.3% to $3.1 billion due to underwriting, acquisition and insurance costs, product, service and other expenses.

The MKL combined ratio deteriorated by 120 basis points (bps) year-over-year to 95.2 in the reported quarter.

Segment update

Insurance: Gross premiums increased 5% year-over-year to $2.2 billion. This growth was driven by new business development and more favorable rates across its personal product lines and programs, as well as growth across most classes of the international portfolio.

Profit from the insurance business was $107.3 million, up 11% year over year. The combined ratio improved 10 bps year-on-year to 94.3.

Reinsurance: Gross premiums were flat year over year at $553.3 billion. Higher gross premiums in the marine and energy, third party liability and loan and surety product lines were offset by significant declines in gross premiums in the professional liability product lines.

Guarantee profit was $12 million, down 50% year-over-year. The combined ratio deteriorated by 470 bps year-over-year to 95.3 in Q1 2024.

Markel’s ventures: Operating revenues of $1.1 billion increased 3% year-over-year. Growth was driven by moderately higher revenues in consumer products and construction companies, construction services companies and transportation-related companies, due to a combination of increased demand and higher prices.

Operating income of $103.9 million increased 13% year-over-year, driven by higher operating margins in its consumer products and construction businesses due to declines in material, freight and labor costs, as well as higher revenues.

The story continues

Financial update

Markel ended the first quarter of 2024 with cash and cash equivalents of $4.3 billion, down 1.3% from the end-2023 level.

The debt balance increased 2% year-over-year to $3.9 billion as of March 31, 2024, compared to end-2023 levels.

Shareholder equity was $15.8 billion at the end of the first quarter of 2024, up 5% from the end of 2023.

Net cash from operating activities was $630.8 billion in the first quarter, more than doubling year-over-year, reflecting higher net premium collections.

How have estimates changed since then?

Over the last month, investors have seen an upward trend in new estimates.

As a result of these changes, the consensus estimate moved by 5.37%.

VGM results

Currently, Markel Group has a weak Growth Score of D, but its Momentum Score is doing much better at B. Following the exact same trajectory, the stock is rated a B on the Value side, placing it in the second quintile for this investment strategy.

Overall, the stock has a Total VGM Score of B. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for this company generally show an upward trend, and the scale of these corrections looks promising. Notably, Markel Group carries a Zacks Rank #3 (Hold). We expect a linear rate of return on the stock over the next few months.

Industry player performance

The Markel Group is part of the Zacks Diversified Operations industry. Over the past month, Carlisle (CSL) in the same industry has gained 5.6%. More than a month ago, the company published its results for the quarter ended March 2024.

Carlisle reported revenue of $1.1 billion in its most recent quarter, representing a -7% year-over-year change. EPS of $3.72 in the same period compared to $2.57 a year ago.

For the current quarter, Carlisle is expected to report earnings per share of $5.71, representing a +10.2% change from the prior-year quarter. The Zacks Consensus Estimate has changed +0.2% over the past 30 days.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #1 (Strong Buy) for Carlisle. The stock also has a VGM Rating of C.

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