Durable Goods (Jun F) -9.4% vs 9.3% Prior, Ex-Trans 0.2% vs 0.2%
On Friday, Keefe, Bruyette & Woods made an adjustment to the price target for Ryan Specialty Group (NYSE:RYAN), bringing it down to $76 from the previous target of $77. Despite the slight reduction, the firm maintains an Outperform rating on the company’s stock. Meyer Shields, an analyst at Keefe, Bruyette & Woods, provided insights into the decision, attributing the change to the company’s margin guidance for 2025, which was lower than anticipated.
Shields noted that Ryan Specialty Group’s Operating EPS of $0.45 for the quarter was in line with the consensus estimate of $0.45, which was based on 15 different estimates ranging from $0.43 to $0.51. The match in earnings per share was primarily due to higher-than-expected commissions and fees, which were somewhat negated by increased compensation expenses and general and administrative (G&A) expenses.
The company’s initial guidance for fiscal year 2025 includes an organic growth rate of 11-13% and an adjusted EBITDAC margin of 32.5-33.5%, which fell below expectations. As a result of the margin outlook and a projected rise in interest expenses, Shields has revised the earnings per share estimates for 2025 and 2026. The new estimates stand at $2.08 and $2.60, down from the previous $2.20 and $2.65, respectively.
The new target price of $76 is based on a multiple of 29.2 times the estimated earnings per share for 2026. Despite the adjustments, Keefe, Bruyette & Woods’ stance on Ryan Specialty Group remains positive, as evidenced by the continued Outperform rating. This suggests that the firm believes the stock will perform better than the overall market or its sector in the foreseeable future.
In other recent news, Ryan Specialty has completed its acquisition of Velocity Risk Underwriters, a managing general underwriter specializing in first-party insurance for catastrophe-exposed properties. This strategic move, facilitated by Oaktree Capital Management, marks a significant expansion for Ryan Specialty’s Underwriting Managers division. The acquisition, valued at $525 million, excludes Velocity’s E&S carrier, which will be acquired by FM. For the year ending December 31, 2024, Velocity reported operating revenue of approximately $81 million. Additionally, Ryan Specialty Holdings issued $600 million in additional 5.875% Senior Secured Notes due 2032 to fund future acquisitions and other corporate purposes. A portion of these proceeds will repay borrowings under the Revolving Credit Facility used for a previous acquisition. In another development, Morgan Stanley (NYSE:MS) has initiated coverage of Ryan Specialty with an Overweight rating, citing the company’s strategic focus on the Excess & Surplus markets as a key advantage. This rating reflects Morgan Stanley’s confidence in Ryan Specialty’s growth potential within the evolving insurance landscape.
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