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On Tuesday, Keefe, Bruyette & Woods, a notable research firm, updated its outlook on Arch Capital Group Ltd. (NASDAQ: NASDAQ:ACGL), a company specializing in insurance and reinsurance services. Analyst Meyer Shields at the firm raised the price target for Arch Capital stock to $113.00, up from the previous $104.00, while reiterating an Outperform rating on the shares. This aligns with the broader analyst consensus, as the stock is currently trading below its Fair Value based on InvestingPro analysis, suggesting potential upside opportunity.
The price target increase comes in the wake of Arch Capital’s first-quarter earnings report for the year 2025, which exceeded the firm’s expectations. Shields adjusted the estimated earnings per share (EPS) for the year 2025 to $7.65, a slight increase from the prior estimate of $7.60. This adjustment reflects the company’s performance in the first quarter, which surpassed the analyst’s projections.
However, the estimated EPS for 2026 was slightly reduced to $9.40 from $9.45. This revision takes into account anticipated higher core loss and expense ratios, along with lower investment income. These factors are somewhat balanced by expectations of lower catastrophe losses and larger reserve releases.
The analyst’s commentary highlighted Arch Capital’s "Cycle Management" strategy as a key driver for continued robust and profitable premium growth. This strategic approach is expected to support significant capital return over the coming 12 months. Additionally, the firm anticipates that Arch Capital will benefit from what is projected to be a favorable property and casualty (P&C) earnings environment.
Investors and market watchers will note the price target is set at a multiple of 12.0 times the firm’s estimated 2026 earnings per share. This valuation reflects confidence in the company’s ability to manage its business cycle effectively, sustaining strong financial performance in the future.
In other recent news, Arch Capital Group Ltd. has been the focus of several analyst reviews following its earnings announcements and strategic moves. JMP Securities recently maintained a Market Outperform rating for Arch Capital, with a price target of $125, after the company’s first-quarter 2025 earnings surpassed expectations. Analysts at JMP Securities highlighted Arch Capital’s strong performance in property and casualty insurance, citing its global distribution network and underwriting expertise as key strengths. Keefe, Bruyette & Woods also reaffirmed an Outperform rating, setting a price target of $113, noting potential reserve releases due to overstatements in previous years’ reserves.
Despite a reduction in the price target to $113, Keefe analysts remain optimistic about Arch Capital’s potential for premium growth. RBC Capital Markets adjusted its price target to $110, while maintaining an Outperform rating, pointing to a strong finish to the year and successful acquisitions, such as Allianz (ETR:ALVG)’s MidCorp unit. The Mortgage Insurance division was particularly praised for its profitability and low default rates. Analysts continue to express confidence in Arch Capital’s strategic management of the insurance cycle, which is expected to support robust growth in the property and casualty market.
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