Why Everest Group Stock Was Wilting This Week
Key Points
Investors punished the stock after the publication of third-quarter earnings.
Key fundamentals dived, while the combined ratio saw a worrying rise.
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Everest Group (NYSE: EG) might share a name with the highest mountain above sea level on our Earth, but its stock hasn't been ascending of late. The insurer's share price was falling by over 11% week-to-date as of Friday before market open, according to data compiled by S&P Global Market Intelligence. The main reason why was third-quarter earnings that didn't rise to expectations.
Climbing down
Total revenue for that period was $4.32 billion for Everest, a figure that was only marginally higher than that of the same quarter of 2024. Operating income, i.e. that not in accordance with generally accepted accounting practices (GAAP) or adjusted, was down significantly. It tumbled by almost 50% to $316 million ($7.54 per share).
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Everest missed the average analyst estimate by a wide margin, as the pundits tracking its stock were collectively modeling a much higher per-share, adjusted profit of $14.31. The company also whiffed, albeit more narrowly, on revenue -- the analyst consensus for this was $4.45 billion.
The combined ratio is considered to be the most important financial metric for the insurance industry, as it divides incurred losses and expenses by earned premiums. A lower percentage, therefore, indicates a profitable underwriting operation. Unfortunately for Everest, its combined ratio jumped to 103.4%, well up from the 93.1% of third quarter 2024.
Snipping time
By my count, four analysts revised their Everest takes just after the earnings were published. Of the quartet, three lowered their price targets while one made a bullish move by upgrading her recommendation on the stock (albeit only to the equivalent of hold).
The most drastic price target cut within the bearish trio was made by Wells Fargo's (NYSE: WFC) Elyse Greenspan, who now feels Everest is now worth $343 per share, well below her previous level of $383. Greenspan maintained her equal weight (i.e., hold) on the stock.
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Wells Fargo is an advertising partner of Motley Fool Money. Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Everest Group. The Motley Fool has a disclosure policy.
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