On Wednesday, CFRA maintained a Buy rating on shares of Travelers Companies Inc. (NYSE:TRV) but reduced the 12-month price target from $240 to $235. The adjustment follows Travelers' first-quarter earnings report, which revealed an operating earnings per share (EPS) of $4.69, surpassing CFRA's estimate of $4.45 but falling short of the consensus estimate of $4.86. Despite the earnings beat, higher-than-expected catastrophe losses impacted the results.
Travelers' first-quarter performance showcased an 18% increase in revenues and a 57% rise in pretax underwriting profits. The company's Business Insurance segment saw a 22% increase in underwriting profits, and the Personal Lines segment experienced a turnaround in underwriting results.
However, these gains were partly negated by a 16% decline in Bond & Specialty underwriting profits. CFRA attributes the tempered outlook to the mixed results but anticipates Travelers to achieve 12% to 14% growth in operating revenues in 2024 and 2025.
CFRA's revised price target is based on an 11.3 times multiple of their 2025 operating EPS estimate of $20.75, which has been increased by $0.80, and a 12.8 times multiple of the 2024 operating EPS estimate of $18.34, raised by $0.79. These multiples compare to Travelers' three-year average forward multiple of 12.4 times and the industry peer average of 12.9 times. The firm expects corrective actions to improve Bond & Specialty results in the future.
Travelers is currently trading at 11.2 times CFRA's 2024 EPS estimate and offers a dividend yield of 1.9%. Based on these metrics and comparisons to peer and historical averages, CFRA views Travelers shares as undervalued. The firm's analysis indicates confidence in the company's potential for revenue growth and operational improvements over the next two years.
InvestingPro Insights
Adding to the comprehensive analysis by CFRA, InvestingPro data paints a robust financial picture for Travelers Companies Inc. (NYSE:TRV). With a market capitalization of $46.97 billion, the company stands as a significant entity in the insurance industry. Travelers' P/E ratio, currently at 15.85, suggests a valuation that may catch the eye of investors looking for stable earnings relative to market price, especially when considering the company's consistent dividend growth, having increased it for 18 consecutive years. The company's revenue growth over the last twelve months as of Q4 2023 is impressive at 12.15%, indicating a strong potential for future financial performance.
InvestingPro Tips for Travelers highlight its status as a prominent player in the insurance industry, which is reflected in its solid return over the last three months, with a price total return of 17.29%. Analysts predict profitability this year, a sentiment backed by the company's performance over the last twelve months. For investors seeking more insights, there are additional InvestingPro Tips available, including an analysis of the company's short-term obligations versus liquid assets and gross profit margins.
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