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On Tuesday, BMO Capital Markets maintained its Outperform rating on Everest Group (NYSE:EG) shares, with a steady price target of $373.00. According to InvestingPro data, the stock currently trades at an attractive P/E ratio of 5.8x and appears undervalued based on comprehensive Fair Value analysis. The stock has drawn significant attention from Wall Street, with analyst price targets ranging from $378 to $490. BMO's analyst highlighted the company's significant charge and revised guidance, noting the reserve changes were approximately 50% higher than the anticipated $812 million. This development could prompt investors to scrutinize the structural underwriting decisions at Everest Group. The firm also adjusted its primary insurance casualty loss trend to around 12%, potentially impacting the expense ratio and challenging growth, as pricing levels are just aligning with these figures. Despite these challenges, InvestingPro's analysis shows Everest Group maintains a GREAT financial health score of 3.2, suggesting robust underlying fundamentals.
The analyst observed that Everest Group is moving away from detailed profit margin guidance towards a broader target of mid-teens return throughout the business cycle. This shift necessitates an estimation of whether the consensus earnings per share (EPS) forecasts will decrease sufficiently for the current update to serve as a "clearing event." Such an event is expected to set the stage for investor confidence in rising EPS revisions as the year unfolds. Notably, InvestingPro reports that nine analysts have recently revised their earnings estimates downward, though the company maintains its impressive 30-year streak of consistent dividend payments. For deeper insights into Everest Group's financial outlook and comprehensive analysis, investors can access the detailed Pro Research Report, available exclusively to InvestingPro subscribers.
BMO also noted that EPS estimates for insurers significantly affected by wildfire losses, including Everest Group, are likely to face downward pressure. This is due to the incorporation of losses in first-quarter 2025 projections and the anticipation of higher-than-average losses for 2026-2027 catastrophe models, which usually rely on a rolling average. As a result, BMO has revised its 2026 EPS estimate for Everest Group from $65.14 to $60.28, marking a 7% decrease. This adjustment reflects the anticipated challenges and the need to factor in the recent and potential future losses into the company's financial outlook.
In other recent news, Everest Group, Ltd. has seen significant changes in its leadership and strategic direction. The company recently announced the appointment of Jim Williamson as Acting CEO, a change that has been met with approval from analysts. BMO Capital Markets upgraded the company's stock from Market Perform to Outperform, citing expectations of bold moves under the new leadership.
The company also reported a strong Q3 performance, with gross written premiums at $4.4 billion and an operating return on equity of 18.7%. Net investment income rose to $496 million, and shareholders' equity reached $15.3 billion. In addition, Everest Consolidator Acquisition Corp, an affiliate of Everest Group, has been granted an extension for completing a merger or similar business combination.
On the other hand, Everest Group announced the resignation of Mike Karmilowicz as Chairman of Everest Global Insurance. Meanwhile, financial services firm Jefferies downgraded Everest Group from Buy to Hold, despite raising the price target to $429 from $420. Lastly, Everest Group announced an expansion to its share repurchase program, with the Board of Directors approving an additional 10 million shares for buyback.
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