Analysts Sniff an EPS Whiff for Genworth Financial
As if two straight quarters of earnings misses, the resignation of its CEO, and a Moody’s credit downgrade aren’t enough, Wall Street’s best rated analysts for earnings accuracy in financial security company Genworth Financial are forecasting an earnings shortfall when the company reports after the market close on July 31st.
The StarMine SmartEstimate of the most accurate analyst forecasts for Genworth is projecting a quarterly EPS of $0.165, which is 7.7% lower than the current mean of $0.178. The SmartEstimate has remained weaker than the mean estimate for the past three months. And one StarMine five-star rated analyst has made a so-called Bold Estimate of more than 45% below the mean.
The May departure of Chairman and CEO Michael D. Frazier has left the company in search of a new leader. There’s been speculation of a restructuring, which could include its earnings-challenged mortgage insurance business, which accounts for 22% of Genworth’s revenues.
The stock jumped in late June, just after Moody’s downgraded Genworth’s credit rating to A3, on rumor of an increased stake in the company by Highfields Capital, led by activist investor Jonathon Jacobson.
As seen below, analyst sentiment, measured by the StarMine Analyst Revision Model (ARM), has plunged from above 80 in early 2012, to a current score of 5 out of 100. The model score for Genworth is a measure of changes in revenue, earnings estimates, and stock recommendations.
For each measure, analysts have become more bearish for the quarter, this year and next year. In the absence of a catalyst such as a restructuring, analyst estimates seem likely stuck at these more bearish levels.