We are downgrading Genworth Financial (GNW) to Underperform due to higher year-over-year losses at the U.S. Mortgage Insurance segment as well as weak results at Retirement and Protection and at International. Genworth’s third-quarter results also fell short of the Zacks Consensus Estimate.
We expect the elevated unemployment rate will continue pressuring its mortgage insurance business. Though the business is showing signs of improvement, the line is still experiencing losses.
Additionally, improvements in its other business lines are expected to be slow, given the economy’s sluggish recovery. Our six-month target price of $13.00 equates to 18.8x our earnings estimate for 2010 — still a premium to the industry average of 12.1x.
Zacks Investment Research
