Earnings season is in full swing, with huge numbers of companies having already given their latest numbers to investors. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed kneejerk reaction to news that turns out to be exactly the wrong move.
Let's turn to Radian Group Inc. (NYSE:RDN). The mortgage-insurance company has been on fire lately as an improving housing market has greatly bolstered the industry's prospects going forward. Let's take an early look at what's been happening with Radian Group over the past quarter and what we're likely to see in its quarterly report next Monday.
Stats on Radian Group Inc. (NYSE:RDN)
|Analyst EPS Estimate||($0.50)|
|Revenue Estimate||$200 million|
|Change From Year-Ago Revenue||8.5%|
|Earnings Beats in Past 4 Quarters||2|
Will Radian Group insure shareholder happiness? During the past three months, analysts have gotten increasingly optimistic about Radian's future. They still see the company losing money throughout 2013, but they see the company becoming profitable as early as the second quarter and have greatly reduced their loss estimates. The shares have definitely responded well to their positive views, rising more than 50% since early November.
Radian suffered a double-whammy during the financial crisis, as both of its primary businesses got hammered. As an insurer of municipal bonds, the company faced huge potential liability as several municipalities weighed bankruptcy as an option. More importantly, the mortgage-insurance industry took an even bigger hit, with Ambac Financial having to declare bankruptcy and peers MGIC Investment Corp. (NYSE:MTG) and Genworth Financial Inc (NYSE:GNW) both having to retrench dramatically in order to survive the crisis.
Since then, Radian has sold off its muni-bond insurance business, as rival Assured Guaranty Ltd. (NYSE:AGO) bought the unit in early 2012. But Radian has been working hard to get its mortgage-insurance business into better shape. During 2012, the company cut its delinquent inventory by 16%, with its new insurance volume more than doubling from 2011's levels as the company continued its multiyear recovery.
The biggest recent news for Radian came late in the quarter, when Freddie Mac joined Fannie Mae in extending approval of Radian's mortgage-insurance unit as eligible to insure mortgages for the rest of 2013. That should help the company stay on track to write new business, and as long as the housing market stays healthy, Radian has the potential for continued growth.
In its quarterly report, Radian needs to demonstrate that it's capitalizing on the opportunity that the housing rebound has provided. Given the huge boost in Radian's shares already, anything short of a strong showing could leave investors feeling disappointed with the mortgage insurer's results.
The article Radian Group Earnings: An Early Look originally appeared on Fool.com and is written by Dan Caplinger.
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