Bear Stearns downgraded MGIC Investment (MTG) to underperform from outperform.
Analyst David Hochstim says a portion of the earnings per share shortfall is attributable to higher delinquencies and higher reserving, but most estimates, including his, appear to have been too optimistic about mortgage insurance growth, and earnings from the company's C-BASS joint venture.
Hochstim notes even after lowering his estimates on Friday morning to reflect slower growth of insurance in force, it appears that his revisions are inadequate. He cut his $6.29 2002 earnings per share estimate to $5.92, andc cut the $6.75 2003 estimate to $6.33. He expects that other mortgage insurance companies will likely continue to generate faster earnings per share growth than MGIC.