Results: ProAssurance Corporation Beat Earnings Expectations And Analysts Now Have New Forecasts

A week ago, ProAssurance Corporation (NYSE:PRA) came out with a strong set of first-quarter numbers that could potentially lead to a re-rate of the stock. The company beat forecasts, with revenue of US$285m, some 4.7% above estimates, and statutory earnings per share (EPS) coming in at US$0.09, 177% ahead of expectations. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for ProAssurance

Taking into account the latest results, the current consensus, from the five analysts covering ProAssurance, is for revenues of US$1.11b in 2024. This implies a measurable 3.7% reduction in ProAssurance's revenue over the past 12 months. ProAssurance is also expected to turn profitable, with statutory earnings of US$0.23 per share. In the lead-up to this report, the analysts had been modelling revenues of US$1.10b and earnings per share (EPS) of US$0.25 in 2024. So it looks like there's been a small decline in overall sentiment after the recent results - there's been no major change to revenue estimates, but the analysts did make a small dip in their earnings per share forecasts.

The consensus price target held steady at US$16.75, with the analysts seemingly voting that their lower forecast earnings are not expected to lead to a lower stock price in the foreseeable future. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic ProAssurance analyst has a price target of US$22.00 per share, while the most pessimistic values it at US$14.00. There are definitely some different views on the stock, but the range of estimates is not wide enough as to imply that the situation is unforecastable, in our view.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. These estimates imply that revenue is expected to slow, with a forecast annualised decline of 4.8% by the end of 2024. This indicates a significant reduction from annual growth of 5.5% over the last five years. By contrast, our data suggests that other companies (with analyst coverage) in the same industry are forecast to see their revenue grow 5.9% annually for the foreseeable future. So although its revenues are forecast to shrink, this cloud does not come with a silver lining - ProAssurance is expected to lag the wider industry.

The Bottom Line

The most important thing to take away is that the analysts downgraded their earnings per share estimates, showing that there has been a clear decline in sentiment following these results. On the plus side, there were no major changes to revenue estimates; although forecasts imply they will perform worse than the wider industry. The consensus price target held steady at US$16.75, with the latest estimates not enough to have an impact on their price targets.

With that said, the long-term trajectory of the company's earnings is a lot more important than next year. We have forecasts for ProAssurance going out to 2025, and you can see them free on our platform here.

It might also be worth considering whether ProAssurance's debt load is appropriate, using our debt analysis tools on the Simply Wall St platform, here.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.