Root, Inc. ROOT is slated to report first-quarter 2024 earnings on Apr 30, after market close. The company delivered an earnings surprise of 34.1% in the last reported quarter.
Factors at Play
The first-quarter performance of Root, an auto insurer with a focus on the personal line, is likely to have benefited from better pricing and underwriting technology as well as prudent cost management. Its reinsurance strategy, driving higher retention and reduction in reinsurance costs, is likely to have added to the upside.
An increase in policies-in-force coupled with higher premiums per policy is likely to have driven higher premiums in the to-be-reported quarter. The Zacks Consensus Estimate for premiums earned is pegged at $170 million, a nearly three-fold increase from the year-ago reported figure. Given a solid policy in force in place, premiums in force are also expected to have increased.
Partnerships across many verticals, including automotive, financial services, affinity and agency channels, are likely to have added to the upside.
Net investment income is likely to have benefited from an improved interest rate environment as the auto insurer invests more in higher-yielding investments. The Zacks Consensus Estimate is pegged at $8 million, up 19.4% from the year-ago reported number.
An increase in policy fees due to positive changes in fee schedules to policyholders is likely to have benefited fee income.
Higher premiums, net investment income as well as fee income are likely to have driven revenues in the to-be-reported quarter. The Zacks Consensus Estimate for first-quarter revenues is pegged at $185 million, indicating an increase of 163.9% from the year-ago reported figure.
Continued investment in technology is likely to have lowered operational costs. Better pricing, prudent underwriting and proper segmentation are likely to have benefited expense ratio. However, the company has a higher number of new customers than long-tenured customers. Thus, increased severity per claim due to higher vehicle repair and medical costs is likely to have affected the loss ratio.
The Zacks Consensus Estimate for the first-quarter bottom line is pegged at a loss of $2.51 per share, narrower than $2.88 loss incurred in the year-ago quarter.
What Our Quantitative Model States
Our proven model does not conclusively predict an earnings beat for Root this time around. This is because the stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). But this is not the case, as you can see below.
Earnings ESP: Root has an Earnings ESP of 0.00% at present. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at a loss of $2.51. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Root, Inc. Price and EPS Surprise
Root, Inc. price-eps-surprise | Root, Inc. Quote
Zacks Rank: Root currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Stocks to Consider
Axis Capital Holdings AXS has an Earnings ESP of +1.56% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at $2.68, indicating an increase of 15% from the year-ago reported figure.
AXS earnings beat estimates in each of the last four reported quarters.
Skyward Specialty SKWD has an Earnings ESP of +7.99% and a Zacks Rank of 2. The Zacks Consensus Estimate for first-quarter 2024 earnings stands at 66 cents, indicating an increase of 57.1% from the year-ago reported figure.
SKWD earnings beat estimates in each of the last four reported quarters.
Enact Holdings ACT has an Earnings ESP of +5.05% and a Zacks Rank of 3. The Zacks Consensus Estimate for first-quarter 2024 earnings is pegged at 99 cents, indicating a decrease of 8.3% from the year-ago reported figure.
ACT earnings beat estimates in each of the last four reported quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Enact Holdings, Inc. (ACT) : Free Stock Analysis Report
Root, Inc. (ROOT) : Free Stock Analysis Report
Skyward Specialty Insurance Group, Inc. (SKWD) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
