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Heritage Insurance Holdings (NYSE:HRTG) stock dropped 4.4% in Wednesday midday trading after JMP downgraded the stock to Market Perform from Market Outperform because the stock jumped past JMP's previous $7 price target on the back of strong Q4 results.
Analyst Matthew Carletti now views the shares as fairly valued, after Heritage stock jumped 25% on Tuesday, propelled by the better-than-expected Q4 earnings.
Heritage's Q4 operating EPS of $1.17 beat JMP's estimate and the consensus of $0.46, driven by lower weather/catastrophe losses and a better-than-expected expense ratio, the analyst said in a note to clients. That was partly offset by a higher ex-catastrophe accident year loss ratio and worse-than projected prior year period development.
Even with its December capital raise that produced gross proceeds of ~$26.5M, "we believe excess capital is limited, and therefore, growth will be as well," Carletti wrote. "While we applaud management for managing through this tough time by focusing on strict underwriting and strong pricing increases, not surprisingly, capital has been tight."
The analyst's Market Perform rating agrees with the SA Quant rating of Hold and breaks with the average Wall Street rating of Buy.