The Zacks Analyst Blog Highlights:MGIC Investment, Genworth Financial, Arch Capital Group and RLJ Lodging Trust
CHICAGO, Feb. 25, 2014 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include the MGIC Investment Corp. (NYSE:MTG-Free Report), Genworth Financial Inc. (NYSE:GNW-Free Report), Arch Capital Group Ltd. (Nasdaq:ACGL-Free Report) and RLJ Lodging Trust (NYSE:RLJ-Free Report).
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Here are highlights from Monday's Analyst Blog:
2014: A Promising Year for Mortgage Insurers
Strong fourth-quarter earnings among sector participants in the private mortgage insurance industry signal a solid entry into 2014. The industry is poised to directly benefit from home price appreciation as well as improvements in the employment scenario.
In the fourth-quarter earnings conference call, Curt Culver, CEO and Chairman of MGIC Investment Corp. (NYSE:MTG-Free Report) said, "I also remain optimistic that the demand for home purchases will continue to recover as household formations return to their historic levels. And as the economy continues to improve, consumers will have more confidence in their future employment and their desire to purchase a home will continue to increase. And since the majority of purchasers that needs a mortgage do not have a 20% down payment, we have a wonderful opportunity in front of us."
Another player, Genworth Financial Inc. (NYSE:GNW-Free Report), produced stellar results at its U.S. Mortgage Insurance (MI) business, which returned to full-year profitability for the first time since 2007. Management at Genworth expects significantly higher earnings at the U.S. MI segment in 2014 over the previous year, as the 2005 to 2008 blocks continue to burn out and high-quality earned premiums from the 2009 to 2013 blocks account for a higher percentage of the overall U.S. mortgage insurance portfolio.
The mortgage players earn premiums by insuring new mortgage originations and refinanced loans. The recent rise in 30-year mortgage rates has induced a significant decline in refinance volume – a trend which is expected to continue in 2014. This year, the industry will see a growing share among new home purchases as housing still remains affordable and national home prices are halfway back to their peak from 2007.
Moreover, the pent-up demand for housing will drive top-line growth in the industry. According to housing experts, much of this growth will be driven by minority groups seeking to fulfill their dream of becoming homeowners. The Harvard Joint Center for Housing Studies reports that minorities will constitute 70% of the 17 million new households projected to be formed from 2010 to 2025.
The players in the mortgage insurance will also benefit from the government's retreat from the market that in turn will transfer a considerable share to the hands of private mortgage insurers.
With regulators working at crafting mortgage insurance eligibility standards, including new capital requirements, the industry is set to gain solidarity going forward.
Improving industry fundamentals are attracting new and potential players such as Arch Capital Group Ltd. (Nasdaq:ACGL-Free Report), which, of late, completed the acquisition of CMG Mortgage Insurance Company (CMG MI) from CUNA Mutual Group and PMI Mortgage Insurance Co. (PMI).
RLJ Lodging Divests $85M in Hotels
In order to ensure a smooth progress of its capital recycling program, RLJ Lodging Trust (NYSE:RLJ-Free Report) divested a portfolio of 11 hotels for about $85.0 million. The selling price of the assets signifies a roughly 7.9% capitalization rate on the assets' expected net operating income in 2013, which is adjusted for awaiting capital expenditures of around $23.0 million.
Following the announcement, this real estate investment trust (REIT) hit a new 52-week high of $25.99 towards the end of the trading session on NYSE on Friday, Feb 21, 2014.
Divestiture Details
Of the 11 offloaded assets, 3 properties are based in Texas and Colorado each, 2 are in Indiana and 1 each in Florida, Michigan and Nevada. These assets are Courtyard Austin University Area, Fairfield Inn & Suites Austin University Area, Hyatt House Dallas Richardson, Hyatt House Colorado Springs, Courtyard Denver Southwest Lakewood, Residence Inn Denver Southwest Lakewood, Residence Inn Indianapolis Airport, Fairfield Inn & Suites Indianapolis Airport, SpringHill Suites Gainesville, Courtyard Grand Rapids Airport and Hampton Inn & Suites Las Vegas / Summerlin.
These are non-strategic assets, selected by the company on the basis of their low earnings before interest, taxes, depreciation, and amortization (EBITDA) contribution, which represented less than 3.0% of RLJ Lodging's estimated 2013 pro forma hotel EBITDA.
In Conclusion
RLJ Lodging anticipates this disposition to enhance its Revenue Per Available Room and U.S. portfolio base. Moreover, the company plans to redeploy the sales proceeds for investing in acquisitions of premium assets like the company's 10-hotel portfolio deal penned earlier this month.
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