Essent Group Misses 4Q Earnings Estimates; Street Stays Bullish

Essent Group Ltd. reported lower-than-expected fourth-quarter results. However, shares of the private mortgage insurance services provider closed 1.9% higher on Friday as its CEO, Mark A. Casale, remains optimistic about 2021.

Casale said, “During 2020, we were also pleased with housing’s resilience, which remains the bright spot in the economy entering 2021 as supply-demand imbalances and favorable first-time home buying trends persist which are positive for our franchise.”

Essent Group (ESNT) reported adjusted earnings of $1.10 per share in the fourth quarter, which missed analysts’ estimates of $1.22 per share and declined 26.2% year-over-year. Its revenues of $247.2 million grew 8.1% year-over-year but lagged the consensus estimates of $252.1 million.

The company’s net premiums earned rose 7% year-over-year, while premiums written grew 9% over the same period. Combined ratio (percentage of premiums paid out as claims and expenses) increased to 44.5% in the fourth quarter from 25.1% in the prior-year period. Essent’s policies-in-force at the end of the quarter were 21.3% higher than in the year-ago period. (See Essent Group stock analysis on TipRanks)

On Jan. 19, J.P. Morgan analyst Richard Shane downgraded Essent Group to Hold from Buy, as the analyst is “increasingly cautious” on the mortgage sector. In a note to investors, Shane said that a rise in interest rates might hurt volume and margins amid stiff competition. Meanwhile, Shane raised the stock’s price target to $52 (17.6% upside potential) from $50, as he is “increasingly constructive” on consumer finance in 2021.

Overall, the rest of the Street has a bullish outlook on the stock, with a Strong Buy consensus rating based on 4 Buys and 1 Hold. The average analyst price target of $56 implies upside potential of about 27% from current levels. Shares have declined by about 9% over the past year.

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