Keefe, Bruyette & Woods Struggles To Justify Valuation On Mercury General

In a report published Wednesday, Keefe, Bruyette & Woods analyst Vincent DeAugustino downgraded the rating on Mercury General Corporation MCY from Market Perform to Underperform, but reiterated the $50.00 price target. In the report, Keefe, Bruyette & Woods noted, "Following Mercury General's 4Q14 earnings call, we're downgrading the shares to Underperform, and maintaining our $50 price target. We're loath to return to Underperform after having made a similar call in 2H14, though we're again at a point where we struggle to justify the valuation, especially after adjusting EPS estimates lower." The report continued, "Our 2015E and 2016E EPS move to $2.49 and $2.59, from $2.72 and $2.87, respectively. Our estimate changes largely reflect higher premium growth forecasts, offset by lower favorable reserve release assumptions and higher expense ratio forecasts." Mercury General Corporation closed on Tuesday at $53.07.