Asmus Puhl Finance Blog

Markel Corp. (NYSE:MKL) the speciality insurer released Q2 2018 results!

The transcript of the Earnings Conference Call has been published by Thomson Reuters.

This marks another quarter of strong steady progress:

Book value/share the all important metric in the insurance industry grew 6,1% yoy to $682,76

Operating revenue grew 34,2% yoy to $1.987 billion and net income per diluted share grew an even more impressive 93,7% to $19.97

Only comprehensive income came in at $164,3 million down from $342.4 million due to a write down of the fixed income portfolio required by accounting standards.

At the insurance operations the combined ratio was a very good 92%

At Markel Ventures operating revenue grew 84.6% to $578.9 million thanks to an acquisition.

In the investment operations segment, the net investment income grew 6.9% from $199 million to $213 million.

Markel’s stock closed at $ 1’178.91 which translates into a price/book ratio of 1.7

Rather expensive for this company which normally trades at no more than 1.5 price/book ratio.

But given the high quality of Markel Corp. and their continued acquisition activity, this price could still be justified for a buyer with a real long term horizon.

Colfax Corp. (NYSE:CFX) the machinery company released Q1 2018 results!

Q1 net income was $ 24.5 million and EPS on an adjusted basis came in at $ 0.48

Revenue for the quarter was $ 880.9 million. Colfax grew sales 20% or 5% excluding acquisitions and FX.

Those results exceeded analysts expectations. CEO Matthew Trerotola was rather upbeat about the markets the company is working in: “Market demand continues to strengthen in most of this segment’s global markets, and we are using CBS to drive further productivity improvements and advance a range of growth initiatives.”

The transcript of the Conference Call was published by Thomson Reuters

Beyond these decent quarterly results in our point of view some important questions remain for an investor in Colfax stock:

Will the industrial markets Colfax is working in finally improve and provide tailwinds for the company now as the positive general economic cycle already reached a rather mature point?

Will structural headwinds as the change to sustainable energy away from fossil energy mean that Colfax is in a downsizing market for the forseeable future?

Is Colfax still a market leader or do they face stiff competition from similar companies which could mean that their low margins would never improve again?

We would be well advised to watch closely these trends over the next couple of months in order to decide whether Colfax stock is still worth our investment dollars.

Colfax expects FY 2018 earnings of $2.05 – $ 2.20 / share and the stock trades at a p/e ratio of 15.

Not too expensive, the market does not seem to expect a major improvement.

Colfax remains a “hold”!

Markel Corp. (NYSE: MKL) the speciality insurer released Q1 2018 Earnings.

Also the transcript of the Earnings Conference Call is available.

Markel this quarter reported book value per common share outstanding of $671.05 , down 2% from $683.55 reported at the end of 2017.

The combined ratio improved 10% to 90% in a year over year comparison.

But the company had to report a diluted net loss of $4.25  this quarter compared to diluted net income per share of $3.90 for the first quarter of 2017. Comprehensive loss to shareholders came in at $174.8 million.

Responsible for this loss has been the adoption of new accounting standards implemented at the start of the year, which required recognizing a $122.1 million pre-tax loss related to the decline in fair value of its equities portfolio since the end of 2017. Additionally net loss included a pre-tax foreign currency loss of $22.1 million, and a non-recurring tax expense of $99.5 million.

So this quarter the insurance business delivered the good results:  gross premium volume in underwriting operations grew 9% year over year to $2.047 billion

Another positive impact came from Markel Ventures where operating revenue grew 36.6% to $392.1 million.

But on the other side “comprehensive loss to shareholders and book value per share were impacted by declines in both our fixed income and equity portfolios, driven by an increase in interest rates and unfavorable movements in the equity markets during the period” as the Co-CEOs Witt and Gayner put it.

But looking into the future Markel should do just fine. There fixed income portfolio has a rather low duration and should earn more interests as rates are starting to rise. The equity portfolio will continue to outperform over the years as it did in the past.

The price/book per share ratio stands at 1.7, not too expensive.

So, Markel today appears even more a “buy” as it did in the past!

Markel Corp. (NYSE:MKL) released FY and Q4 2017 earnings demonstrating that the speciality insurer finished FY 2017 in excellent shape!

Book value per share the most important ratio in the insurance business rose 12.7% from $606.30 at year-end 2016 to $683.55 as of Dec 31, 2017.

The combined ratio in the 4th quarter was 95% improving rapidly from the 134% in Q3 2017 due to the losses from the hurricanes.

The equity portfolio of Markel in 2017 contributed to the success in a remarkable way:

The portfolio climbed 25.5% outperforming the S&P500 not only this year but already for 3 decades.

Good news also came from Markel Ventures :

Operating revenue climbed 29.5% to $400 million in 2017, already including Markel’s majority stake acquisition in Costa Farms in August and net income jumped to $65.2 million from $6.7 million in the 4th quarter 2016.

In the 4th quarter Markel also completed the acquisition of property and casualty insurance services company State National, which adds a premier fronting platform and collateral protection coverages to their insurance operations.

At yesterday’s closing price of $1084.97 Markel’s stock is valued at a price/book ratio of 1.6

Not cheap but certainly a buy at any dips in this volatile market.

And do not forget that insurances and banks in general will once again be able to earn interest income when rates are continuing to climb.

Colfax Corp. (NYSE: CFX) has become a difficult company to evaluate:

The company has a strong culture, is very cost conscious applying their Colfax Business System (CBS) tools. They are able to acquire and integrate rapidly complementary businesses.

But since 2014 the company struggles to produce significant growth which is reflected by the share price since then.

In 2017 they exited the fluid handling business selling it to Circor International Inc. and by that reducing debt and improving their balance sheet.

But the question remains: Will Colfax return to higher growth rates investors once were accustomed to?

Unfortunately the release of FY and Q4 2017 results did not provide any certain answers:

Sure, earnings on a pro forma basis beat market estimates by a penny but on a GAAP basis net income per share for the 4th quarter came in at only $0.10 per share.

From continuing operations Colfax even reported a loss of $1.53 per share.

Apparently the fabrication technology sector fared rather well in the 4th quarter. Colfax reported an organic growth of 7%.

But the Air & Gas Handling sector is expected to improve only in the second half of 2018 as CEO Trorotola explained on the Conference Call.

Reflecting the uncertainty Colfax gave guidance of FY 2018 earnings of $ 2 – $ 2.15 but once again only on an adjusted basis!

The market did not like what he saw and sent the share price down by 9%.

So what should shareholders do now?

Perhaps the best for the moment is a „wait and see approach“. In 2 quarters it should be clear whether Colfax’ end markets are finally recovering or not.

If not and if the share price continues to hover around today’s prices it’s perhaps the moment to look for better investment opportunities elsewhere!

Colfax Corp. (NYSE: CFX) the fabrication technology and air and gas handling company released FY and Q4 2017 results which sent the stock 9% down on the day!

Colfax Corp. (NYSE:CFX) the air and gas handling and fabrication technology group released Q3 2017 results.

They missed the revenue estimate and the share price fell as much as 13% .

But Colfax confirmed its outlook of $1.65-$1.75 of adjusted EPS, which includes a $0.25-$0.28 full year contribution from its recently sold fluid handling business.

Reduced power market demand and project delays in oil & gas contributed to lower total orders. Colfax believes that oil & gas is a fundamentally improving market, but at the same time they are expanding Air and Gas restructuring actions „to support the business’ 2018 profit growth objective in a less certain revenue environment“.

This quarter Colfax sold its fluid handling business for $ 860 million in order „to strengthen the balance sheet and support the strategic growth program.“

Investors will watch whether the announced growth will be realized within the next couple of quarters as the environment of the oil and gas market in reality will remain difficult. A secular trend to electric mobility has already begun and will certainly reduce demand for oil products over the next years.

Colfax stock trades at a rather expensive p/e ratio of 23. Therefore Colfax remains a hold!

Markel Corp. (NYSE: MKL) released Q3 2017 results last week.

Markel reported book value per common share outstanding of $ 641.20 up 6% from $ 606.30 at December 31, 2016.

The insurance segment incurred huge losses because of the hurricanes and the Mexico City earthquake.

Therefore the combined ratio came in at 134% for the third quarter of 2017 compared to 98% for the third quarter of 2016.

This was largely expected by the market as Markel announced the loss estimate of $mil 503 already in advance of the earnings release.

But income and performance of their investment portfolio and of Markel Ventures more than compensated for the payments to policy holders. As CIO and Co-CEO Tomas Gayner pointed out on the conference call: “… there are positive returns from two of our three engines that total well over $1 billion of pre-tax ins, compared to the $0.5 billion of pre-tax outs.”

Markel’s strong balance sheet and conservative loss reserve policy once again demonstrated their importance in difficult times which in the insurance business can occur at any moment!

Markel’s stock today trades at a price / book ratio of 1.7, rather expensive compared to the valuation over the last years.

For new investment perhaps wait for a lower entry point!

Colfax (NYSE: CFX) sells its fluid handling business to Circor International Inc. for $860 mil.

For Colfax this deal provides liquidity to grow its ESAB and Howden business as it exits the fluid handling business.

For shareholders this deal points to growing profitibility of Colfax going forward. They came to the conclusion not to be able to grow the fluid handling division enough by own means in order to be more profitable. So they decided to exit the business completely and to use the liquidity for acquisitions.

Certainly another interesting step of their Colfax Business System philosophy!

This news by itself did not move the share price but stay tuned until we get a clearer picture of their acquisition strategy!

Colfax (NYSE: CFX) the gas and fluid handling company reported good Q2 2017 results.

Adjusted earnings per share came in at $0.43

Net sales generated were $965.8 million, rising 0.9% year over year.

Colfax thinks that it will benefit from its organic and inorganic growth initiatives as well as from improving end-market conditions. It predicts the Gas and Fluid segment to witness organic growth in the third quarter.

The company increased its adjusted earnings guidance to $1.65−$1.75 per share from the previous projection of $1.60−$1.75.

This means that Colfax shares trade at a p/e of 24. Seems rather expensive with the still limited perspective of their industry. Colfax is not a buy at this moment!