Sunday, February 24, 2013

Assured Guaranty Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Assured Guaranty (NYSE: AGO  ) is about to release its quarterly earnings. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Mortgage and municipal bond insurance were two of the hardest-hit industries during the financial crisis, and with exposure to both, Assured Guaranty felt the impact especially strongly. Yet conditions have improved immensely in the industry, paving the way to big gains even as the company has retrenched its business. Let's take an early look at what's been happening with Assured Guaranty over the past quarter and what we're likely to see in its quarterly report on Wednesday.

Stats on Assured Guaranty

Analyst EPS Estimate

$0.70

Change From Year-Ago EPS

(26%)

Revenue Estimate

$198.3 million

Change From Year-Ago Revenue

(12%)

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Will Assured Guaranty insure success for investors?
Analysts have cut back on their estimates for the just-ended quarter, shaving $0.03 per share in the past couple of months. But their calls for full-year 2013 have stayed stable, and the stock has responded very favorably, with gains of more than 35% since mid-November.

Assured Guaranty has been a survivor in the financial insurance business. Even as Ambac Financial had to declare bankruptcy and other rivals suffered their own near-death experiences, Assured Guaranty has recovered much of the ground it lost during the financial crisis. That has put it in a position to aim for future growth, with its purchase of Radian Group's (NYSE: RDN  ) municipal-bond insurance business early last year being one example of Assured Guaranty playing for the long run.

But Assured Guaranty has also seen some recent good news, having won a huge case earlier this month that will have wide-ranging implications throughout the industry. The company sued Flagstar Bancorp (NYSE: FBC  ) over alleged misrepresentations of Flagstar loans used to create mortgage-backed securities that Assured Guaranty insured. A positive ruling led to a $90 million award for Assured Guaranty. That's obviously good news for the company, but it means even more for fellow insurer MBIA (NYSE: MBI  ) , which now hopes to win its own much-larger lawsuit against Bank of America (NYSE: BAC  ) over similar allegations. B of A already settled its own dispute with Assured Guaranty last year.

In its earnings report, watch closely for Assured Guaranty's plans to take advantage of steadily improving conditions in the housing industry. With its recent 11% dividend boost, the company is clearly optimistic about its future, and Assured Guaranty looks like the high-quality player in an industry that's rebounding.

Find out more about how Bank of America is dealing with potential liability to mortgage-insurance companies by reading our premium research report on the bank. Inside, senior banking analysts Anand Chokkavelu and Matt Koppenheffer share their views on�whether B of A is a buy even after its monumental run in 2012. Click here now to claim your copy, and as an added bonus you'll receive a full year of free updates and expert guidance as key news breaks.

Click here to add Assured Guaranty to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

No comments:

Post a Comment