HCI Group (HCI) Announces Third Quarter Loss and Missing Revenue Estimates

HCI Group (HCI) exited with a quarterly loss of $5.62 per share against Zacks consensus estimate of a loss of $6.04. That compares to a loss of $0.64 per share a year ago. These figures are adjusted for non-recurring items.

This quarterly report represents an earnings surprise of 6.95%. A quarter ago, this P&C insurance holding company was expected to post a profit of $0.20 per share when it actually produced a loss of $0.71, delivering a surprise -455%.

In the past four quarters, the company has exceeded consensus EPS estimates three times.

HCI Group, which is part of the Zacks Insurance – P&C segment, posted revenue of $126.65 million for the quarter ended September 2022, missing Zacks’ consensus estimate by 10.21%. That compares to revenues of $99.22 million a year ago. The company has exceeded consensus revenue estimates twice in the past four quarters.

The sustainability of the immediate stock price movement based on recently released numbers and future earnings forecasts will primarily depend on management’s comments on the earnings call.

HCI Group shares have lost around 57.2% since the start of the year compared to a -20.1% decline for the S&P 500.

What is the next step for the HCI group?

Although HCI Group has underperformed the market so far this year, the question on investors’ minds is: what’s next for the stock?

There are no easy answers to this key question, but one reliable metric that can help investors answer it is the company’s earnings outlook. This includes not only the current consensus earnings expectations for the upcoming quarter(s), but also how those expectations have changed recently.

Empirical research shows a strong correlation between short-term stock movements and trends in earnings estimate revisions. Investors can track these revisions on their own or rely on a proven scoring tool like Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions.

Before that Press release, the trend of estimate revisions for HCI Group: unfavourable. While the magnitude and direction of estimate revisions may change following the release of the company’s earnings report, the current situation translates into a Zacks No. 5 ranking (strong sell) for the stock. Thus, stocks are expected to underperform the market in the near future. You can see the full list of today’s Zacks #1 Rank (Strong Buy) stocks here.

It will be interesting to see how the estimates for the next few quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is -$0.54 on $131.3 million in revenue for the upcoming quarter and -$6.78 on $533.14 million in revenue for the current fiscal year .

Investors should be aware that the outlook for the sector can also have a significant impact on stock performance. In terms of Zacks industry rankings, P&C Insurance currently sits in the bottom 35% of over 250 Zacks industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

Another stock in Zacks Finance’s broader sector, Prospect Capital (PSEC), has yet to report results for the quarter ending September 2022.

This business development company is expected to post quarterly earnings of $0.20 per share in its next report, representing a year-over-year change of -4.8%. The consensus EPS estimate for the quarter remained unchanged for the past 30 days.

Prospect Capital’s revenue is expected to be $195.6 million, up 15.4% from the year-ago quarter.

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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.

Sallie R. Loera