Reinsurance Group of America Q3 Earnings: Is NYSE:RGA Cheap at 0.5x Price/Book?

in EARNINGS/INVESTING IDEAS by

Reinsurance Group of America, Incorporated (NYSE:RGA) is scheduled to report Q3 earnings results on November 5, 2020.

The company is expected to report earnings of $1.77/share on revenue of $3.626 billion. The consensus earnings per share (EPS) of $1.77/share is based on a poll of 9 analysts and represents a decline in eps of −55.9% over the same quarter last year, when the company reported earnings of $4.02/share.

The revenue forecast of $3.626 billion based on a poll of 4 analysts implies a year-over-year (YoY) decline in revenue of 0.0%. Last year the company reported $3.628 billion in revenue for the quarter.

Expected to report EPS contraction of −55.9% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $3,626.17 $3,627.57 0.0%
EPS $1.77 $4.02 −55.9%

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 8 tracked quarters, missed 4 quarters, and met expectations 1 quarter.

What are your expectations from Reinsurance Group of America, Incorporated for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 -$0.85 $1.36 259.2% Beat
Q1, 2020 $2.37 $1.41 −40.4% Missed
Q4, 2019 $3.66 $3.43 −6.3% Missed
Q3, 2019 $3.50 $4.02 14.7% Beat
Q2, 2019 $3.42 $3.31 −3.2% Missed
Q1, 2019 $2.62 $2.61 −0.2% Missed
Q4, 2018 $3.46 $3.46 0% Met
Q3, 2018 $3.27 $4.03 23.1% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by increasing 11.5%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 4, 2020 $85.08 $94.84 11.5% Increase
May 5, 2020 $100.97 $87.28 −13.6% Decline
January 28, 2020 $152.09 $146.21 −3.9% Decline
October 30, 2019 $162.28 $162.47 0.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.65, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.65 implies a 0.4% chance of earnings manipulation.

Fundamentals And Technical Analysis

Reinsurance Group of America, Incorporated is currently trading at $95.90/share, down −4.0% for the day. The company is trading at approximately 56.6% of its 52-week high of $169.26/share. The company’s stock price is up 1.1% since the last earnings report and down −8.4% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 41.49 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:RGA Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 11.46 and a forward P/E multiple of 15.00.

Reinsurance Group of America, Incorporated’s current share price also implies a price-to-book (P/B) multiple of 0.52. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $95.90
P/E Ratio 11.5x
P/E Ratio (Fwd) 15.0x
PEG Ratio −0.4
Total Debt / Total Capital 37.1%
Levered Free Cash Flow $3.889 billion
EV / EBITDA −39.6x

Finbox

Reinsurance Group of America, Incorporated is a mid-cap stock with a market capitalization of $6.785 billion and a total enterprise value of $6.478 billion. The company operates in the Financials sector and the Insurance industry.

Reinsurance Group of America, Incorporated engages in reinsurance business. It offers individual and group life and health insurance products, such as term life, credit life, universal life, whole life, group life and health, joint and last survivor insurance, critical illness, disability, and longevity products, as well as asset-intensive and financial reinsurance products. The company also provides reinsurance for mortality, morbidity, lapse, and investment-related risk associated with products; and reinsurance for investment-related risks. In addition, it develops and markets technology solutions; and provides consulting and outsourcing solutions for the insurance and reinsurance industries. The company serves life insurance companies in the United States, Latin America, Canada, Europe, the Middle East, Africa, and the Asia Pacific. Reinsurance Group of America, Incorporated was founded in 1973 and is headquartered in Chesterfield, Missouri.

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