Shares of Universal Insurance Holdings (UVE 4.11%) climbed as much as 11% early Tuesday, then settled to close up 6.6% after the insurance services company announced a new share repurchase authorization.
NYSE: UVE
Key Data Points
Does Universal Insurance think its own stock is cheap?
In a press release this morning, Universal Insurance announced that its board of directors has approved a new $20 million share repurchase program. That's a reasonably large sum when you consider that it's around 3% of the company's entire market capitalization, which as of this writing stands at just above $600 million.
But what's particularly interesting about this repurchase agreement is that it comes after shares of Universal Insurance soared around 20% over the past three weeks on the heels of the company's better-than-expected quarterly update late last month. In that release, Universal Insurance delivered fourth-quarter adjusted (non-GAAP) net income of $12.6 million, or $0.43 per share, surprising Wall Street analysts who were anticipating a net loss of $0.16 per share. The company also revealed that it repurchased around 223,000 of its own shares for $3.6 million last quarter, leaving around $4.1 million remaining under its previous authorization.
What's next for Universal Insurance investors?
This move is doing more than reducing the number of Universal Insurance's shares outstanding. The market is viewing this new buyback authorization as a vote of confidence in the underlying value management sees in their own company's stock. Couple that with a healthy dividend yielding around 3.1% annually at today's prices, and it's no surprise to see shares of Universal Insurance extending their rally today.
