Raymond James equity analyst Gregory Peters upgraded Kemper Corp. from "market perform" to "strong buy" following management's pricing, re-underwriting and claims initiatives in its nonstandard auto business.
Peters wrote in a research note that the company's nonstandard auto business has "started to turn" thanks to those plans.
Kemper reported second-quarter consolidated net operating income of $21.0 million, or 41 cents per share, an increase from $4.6 million, or 9 cents per share, in the year-ago quarter.
Second-quarter net income jumped $36.6 million, or 71 cents per share, compared with $4.0 million, or 8 cents per share, in the prior-year period.
In addition, Peters wrote, management has been continuing to improve the company's preferred auto business. "On a consolidated basis, we believe the combination of the positive pricing environment in personal auto and management's strategic initiatives should position the company to report a gradually improving [return on equity] through 2019," Peters wrote.
He maintained that that if the company closes in on a 10% return on equity, it could represent annualized operating EPS of up to $4 or more, which "represents considerable upside potential relative to near-term expectations."
Peters wrote that his firm is raising its 2017 and 2018 non-GAAP EPS estimates to $1.60 and $2.50, respectively, from $1.10 and $2.30 previously, reflecting recent results and anticipated improvements in the nonstandard business. He raised the price target for the company to $55.