Strength Seen in Argo Group (ARGO): Can Its 7.7% Jump Turn into More Strength?

Argo Group (ARGO) shares soared 7.7% in the last trading session to close at $42.26. The move was backed by solid volume with far more shares changing hands than in a normal session. This compares to the stock's 5.5% loss over the past four weeks.

Argo Group boasts highly profitable business, growth initiatives, expense initiative program, digitalization and a solid capital position. ARGO’s highly profitable businesses, Argo Pro, Casualty, Construction, Environmental, Inland Marine and Surety, are well-poised for growth in attractive markets. These businesses together contribute two-thirds of the U.S. premium base.

However, the board of directors announced to look for strategic alternatives, which will include a potential sale, merger or other strategic transaction to enhance shareholders value. Argo Group anticipates generating an operating return on common equity between 9% and 11% in 2022.

This action is in tandem with the management’s effort to ramp up growth, lower volatility and proper expense management.

Exiting reinsurance operations and non-core lines of business, lowering property exposure substantially and reducing volatility bodes well for improving underwriting profitability. ARGO remains focused on investing in areas where it sees immense potential.

Argo Group’s consistent investments in technology helps  improve operating efficiency and risk selection while reducing overall expenses.

This property and casualty insurance underwriter is expected to post quarterly earnings of $1.07 per share in its upcoming report, which represents a year-over-year change of +143.2%. Revenues are expected to be $537.53 million, up 5.3% from the year-ago quarter.

Earnings and revenue growth expectations certainly give a good sense of the potential strength in a stock, but empirical research shows that trends in earnings estimate revisions are strongly correlated with near-term stock price movements.

For Argo Group, the consensus EPS estimate for the quarter has been revised 6.6% lower over the last 30 days to the current level. And a negative trend in earnings estimate revisions doesn't usually translate into price appreciation. So, make sure to keep an eye on ARGO going forward to see if this recent jump can turn into more strength down the road.

The stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks Rank #1 (Strong Buy) stocks here >>>>

Argo Group is part of the Zacks Insurance - Property and Casualty industry. Mercury General (MCY), another stock in the same industry, closed the last trading session 1.7% higher at $51.60. MCY has returned -8.6% in the past month.

Mercury General's consensus EPS estimate for the upcoming report has remained unchanged over the past month at $0.65. Compared to the company's year-ago EPS, this represents a change of -51.5%. Mercury General currently boasts a Zacks Rank of #3 (Hold).

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