Finally! Some Good Earnings Reactions For Genworth Financial

Earnings season wasn't so nice to Genworth Financial on the insurer's last go-around. But this time, investors are liking what they see.

Feb 5, 2014 at 6:30PM
Gnw

Source: Flickr, Andrew Bain

Genworth Financial (NYSE:GNW) took a tumble following its third-quarter earnings report, despite tripling its bottom line year-over-year. Did the fourth quarter have the same fate in store for the insurer?

Ending on a high note
After reporting its fourth-quarter and full year 2013 results on Tuesday morning, Genworth Financial got the boost it may have expected back in October. Though the insurer didn't report a second quarter of tripled net income, it did beat all of the analyst estimates, unlike last time.

MetricAnalyst EstimateActual Result
Revenue $2.38 billion $2.41 billion
EPS $0.30 $0.41
Beats in past 4 quarters 2

Source: Yahoo! Finance and GNW Q4 2013 press release

With the good news coming across the board, investors rewarded the company with a 1.61% increase during the trading day. And as of 8:00pm Tuesday evening, the stock was up another 4.4% in after-hours trading -- most likely in anticipation of the insurer's conference call the following morning before the market opens.

Turnaround story

Genworth Financial has been in the midst of a turnaround for quite some time, mostly hinged on the improvement of its long-term care products through both various new offerings and improved profitability through pricing increases. The company started the LTC project with an estimated $265-$300 million increase in premium rates through 2017, but it needed state regulatory approval.

The company reported in its fourth quarter results that it has received approval from 41 states to date, with nearly two-thirds of the estimated gains already being realized for in-force policies.GNW Chart

GNW data by YCharts

Home is where the heart (and profit) is
Mortgage insurance has been the division pushing Genworth forward over the past few quarters as it revitalizes its other segments. There's been no secret that Genworth, American International Group (NYSE:AIG), Radian Group (NYSE:RDN), and other private mortgage insurers have been raking in the big bucks as the US housing market went into high gear during 2013.

But increasing interest rates have some concerned that the housing boom is over -- leaving the PMIs to find new ways to boost their remarkable revenue growth. Genworth certainly reported a new trend that shows the impact of interest rates on the originations market.

During the fourth quarter, flow for the US was down due both to seasonality as well as a consistent burn of the company's 2005-2008 book. Though the top line for Canadian mortgage insurance showed a huge decline, the year-over-year change was positive once one-time items were removed. The overall segment was boosted by Canadian business, which reported a 20% increase in its flow, thanks to a larger origination market.

Genworth continues to benefit from the exit of the Federal Housing Authority from the mortgage insurance market. With a five-point increase during the company's market penetration is estimated to be around 13%, making it a key contender for new business if the market heats up again.

A promising future
With all of the changes that it's been making over the past few quarters, Genworth Financial has successfully positioned itself for future growth. Though it may have hit some rough patches with investors after missing the analyst-set mark, the insurer is comfortably within the "beat" category this earnings season, and will likely be there in the future quarters to come.

Keys to success
Investors have been clear on one thing that they desire most above all else: growth. And it's no surprise given that one of the ultimate keys to investing success is the discovery of major growth stocks. Though it's a hard task for anyone, David Gardner has found them time, and time, and time again with stock returns like 926%, 2,239%, and 4,371%. In fact, just recently one of his favorite stocks became a 100-bagger. And he's ready to do it again. You can uncover his scientific approach to crushing the market and his carefully chosen six picks for ultimate growth instantly, because he's making this premium report free for you today. Click here now for access.

Jessica Alling has no position in any stocks mentioned. The Motley Fool recommends American International Group. The Motley Fool owns shares of American International Group and has the following options: long January 2016 $30 calls on American International Group. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

1 Key Step to Get Rich

Our mission at The Motley Fool is to help the world invest better. Whether that’s helping people overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we can help.

Feb 1, 2016 at 4:54PM

To be perfectly clear, this is not a get-rich action that my Foolish colleagues and I came up with. But we wouldn't argue with the approach.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich" rated The Motley Fool as the #1 place online to get smarter about investing.

"The Motley Fool aims to build a strong investment community, which it does by providing a variety of resources: the website, books, a newspaper column, a radio [show], and [newsletters]," wrote (the clearly insightful and talented) money reporter Kathleen Elkins. "This site has something for every type of investor, from basic lessons for beginners to investing commentary on mutual funds, stock sectors, and value for the more advanced."

Our mission at The Motley Fool is to help the world invest better, so it's nice to receive that kind of recognition. It lets us know we're doing our job.

Whether that's helping the entirely uninitiated overcome their fear of stocks all the way to offering clear and successful guidance on complicated-sounding options trades, we want to provide our readers with a boost to the next step on their journey to financial independence.

Articles and beyond

As Business Insider wrote, there are a number of resources available from the Fool for investors of all levels and styles.

In addition to the dozens of free articles we publish every day on our website, I want to highlight two must-see spots in your tour of fool.com.

For the beginning investor

Investing can seem like a Big Deal to those who have yet to buy their first stock. Many investment professionals try to infuse the conversation with jargon in order to deter individual investors from tackling it on their own (and to justify their often sky-high fees).

But the individual investor can beat the market. The real secret to investing is that it doesn't take tons of money, endless hours, or super-secret formulas that only experts possess.

That's why we created a best-selling guide that walks investors-to-be through everything they need to know to get started. And because we're so dedicated to our mission, we've made that available for free.

If you're just starting out (or want to help out someone who is), go to www.fool.com/beginners, drop in your email address, and you'll be able to instantly access the quick-read guide ... for free.

For the listener

Whether it's on the stationary exercise bike or during my daily commute, I spend a lot of time going nowhere. But I've found a way to make that time benefit me.

The Motley Fool offers five podcasts that I refer to as "binge-worthy financial information."

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. It's also featured on several dozen radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable ... and I don't say that simply because the hosts all sit within a Nerf-gun shot of my desk. Rule Breaker Investing and Answers contain timeless advice, so you might want to go back to the beginning with those. The other three take their cues from the market, so you'll want to listen to the most recent first. All are available at www.fool.com/podcasts.

But wait, there's more

The book and the podcasts – both free ... both awesome – also come with an ongoing benefit. If you download the book, or if you enter your email address in the magical box at the podcasts page, you'll get ongoing market coverage sent straight to your inbox.

Investor Insights is valuable and enjoyable coverage of everything from macroeconomic events to investing strategies to our analyst's travels around the world to find the next big thing. Also free.

Get the book. Listen to a podcast. Sign up for Investor Insights. I'm not saying that any of those things will make you rich ... but Business Insider seems to think so.


Compare Brokers