By Connor Campbell, Financial Analyst, Spreadex
Stock of the day: Admiral Group PLC
Can Admiral Group (LON:ADML) insure (boom tish) a positive reaction following next Wednesday’s interim statement?
The first few months of the year were fairly rocky for Admiral. At the end of February it announced it was pushing its full year results back as it had to assess the impact of changes made to the Ogden rate – i.e. the discount rate used by UK courts to calculate personal injury damages awards – before updating investors. Understandably the markets weren’t too impressed with this development, sending the stock as much as 9% lower before settling at a more reasonable 2.7% decline.
Cut to a week later and Admiral actually managed to recover those losses, and then some, with its annual report. Though those Odgen rate issues caused a £105 million hit to the company’s pre-tax profit – taking Admiral from a pre-shift 3% rise to a post-change 25% fall to £284.3 million – the fact that it maintained its 114.4p full year dividend reassured investors, who sent the stock 5% higher in the space of 48 hours.
From that point onwards things quickly picked up for the insurer. In mid-March some generic bid speculation caused the stock to cross the £20 mark, before a steady rise in April and a sharp increase at the start of May pushed Admiral above £21 for the first time since the previous August.
Going ex-dividend on May 11th then set the stock back, and left it bouncing between £20 and £20.50 all the way until early August (with a brief foray to £21 in mid-June). However, an article in Forbes highlighting the stock as one to watch after the Association of British Insurers revealed UK motor insurance hit a record high in Q2 2017 kick-started another round of gains, causing Admiral to hit an effective 12 month peak of £21.80 on Monday. It now sits at a current trading price of £21.54
In terms of next week’s interim results, Admiral is expected to more than double its revenue, from £259.7 million to £553 million year-on-year, with a slight 2.4% increase in earnings to 57.16p per share.
Admiral Group PLC has a consensus rating of ‘Hold’ alongside an average target price of £18.65.
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