RDN - KBW cuts Radian Group Essent to Market Perform on valuation

2023-06-13 10:13:25 ET

In its review of the mortgage insurance sector, KBW downgraded both Radian Group ( NYSE: RDN ) and Essent ( NYSE: ESNT ) to Market Perform from Outperform primarily on valuation, as it believes near-term multiple expansion is unlikely.

"Despite market concerns about an impending recession, mortgage insurers have been the best-performing subsector in the residential mortgage industry in 2023, supported by book value growth and multiple expansion," said analyst Bose George.

"While we expect book value growth to continue in H2 and support share price growth, we believe near-term multiple expansion is unlikely as investors are more likely to wait for more attractive entry points given the risk of an economic downturn," he added.

KBW adjusted 2023/2024 EPS estimates for Radian ( RDN ) to $3.35/$3.32 (from $3.33/$3.30) and for Essent ( ESNT ), to $6.12/$6.24 (from $6.07/$6.24).

Price targets for Radian ( RDN ) and Essent ( ESNT ) were maintained at $27.50 and $50, respectively.

KBW reaffirmed Outperform ratings on MGIC Investment ( MTG ) and Enact Holdings ( ACT ), both of which trade below book value.

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