Dj Markel Corporation, Inst Holders, 3Q 2024 (Mkl)

Markel Group Inc. MKL shares have gained 16.5% in the year-to-date period against the industry’s decline of 7%. With a market capitalization of $21.29 billion, the average volume of shares traded in the last three months was 0.03 million.

MKL Outperforms Industry YTD

Earnings of Markel Group grew 46.2% in the last five years, better than the industry average of 14.7%. MKL has a solid surprise history. It surpassed earnings estimates in two of the last four quarters while missing in the other two, the average being 35.42%.

MKL Trading Above 50-Day Moving Average

Currently priced at $1,655.36, this Zacks Rank #3 (Hold) stock is trading above its 50-day and 200-day simple moving average (SMA) of $1,574.64 and $1,546.01, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.

Markel Group’s Favorable Return on Capital

MKL’s return on invested capital (ROIC) has increased every year. This reflects MKL’s efficiency in utilizing funds to generate income. ROIC in the trailing 12 months was 7.5%, higher than the industry average of 3.5%.

Factors Benefiting MKL Stock

The Zacks Consensus Estimate for Markel Group for 2025 earnings per share and revenues indicates an increase of 11.9% and 6.2%, respectively, from the corresponding 2024 estimates.

MKL has been generating improved premiums. An improvement in new business volume, strong retention levels, continued increases in rates and expanded product offerings should help the insurer retain the momentum.

Investment income should continue to benefit from an improving rate environment, higher interest income on cash equivalents, fixed maturity securities and short-term investments due to higher yields.

Markel Group considers strategic buyouts a prudent approach to ramp up its growth profile. Acquisitions have helped the company enhance its surety capabilities, ramp up Markel Ventures’ revenues and expand its reinsurance product offerings. The insurer has been pursuing acquisitions to achieve profitable growth in insurance operations and create additional value on a diversified basis in Markel Ventures’ operations.

Higher revenues at construction services and transportation-related businesses due to a combination of increased demand, higher prices and growth, as well as a rise in production at one of the equipment manufacturing businesses, are expected to boost operating revenues. The increase also reflected a full-year contribution from Metromont.

Distribution of Wealth

Banking on a strong capital position, the company engages in share buybacks, a prudent way to distribute wealth to its shareholders. However, it presently prefers to invest in organic growth initiatives for its Insurance business. The company has a share repurchase program authorized by the board to buy back up to $750 million of shares. As of Sept. 30, 2024, $332.1 million remained available for repurchases under the program. Also, given its solid cash position of $3.9 billion, the company should not face any difficulty in meeting short-term obligations.

MKL Shares are Affordable

Markel Group is trading at a discount compared with the industry average. It presents a compelling investment opportunity with its attractive forward 12-month price-to-book ratio of 1.29X, lower than the industry average of 4.30X.

Risks for Markel Group

However, Markel Group is exposed to catastrophe loss, inducing volatility in underwriting results. Exposure to cat loss always remains a concern, given its unprecedented nature. Also, the company has been experiencing an increase in operating expenses due to higher losses and loss adjustment expenses, underwriting, acquisition and insurance expenses. MKL should strive to ensure that growth in total revenues outpaces the rise in expenses. Otherwise, the operating margin is likely to suffer.

Key Picks

Investors interested in the other conglomerates may look at some better-ranked players like Hitachi Ltd. HTHIY, Federal Signal Corporation FSS and The Koninklijke KPN NV KKPNF. While Hitachi sports a Zacks Rank #1 (Strong Buy), Federal Signal and The Koninklijke carry a Zacks Rank #2 (Buy) each at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Hitachi’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 303.64%. In the year-to-date period, HTHIY stock has surged 72.6%.

The Zacks Consensus Estimate for HTHIY’s 2024 and 2025 earnings indicates 16.4% and 24.8% year-over-year growth, respectively.

Federal Signal’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 11.81%. In the year-to-date period, FSS stock has jumped 20.4%.

The Zacks Consensus Estimate for FSS’ 2024 and 2025 earnings indicates 29.4% and 12% year-over-year growth, respectively.

The Zacks Consensus Estimate for The Koninklijke’s 2024 and 2025 earnings indicates 29.4% and 12% year-over-year growth, respectively. In the year-to-date period, KKPNF stock has gained 9%.

The Zacks Consensus Estimate for KKPNF’s 2024 and 2025 earnings indicates 29.4% and 12% year-over-year growth, respectively.

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