What happened? The share price of QBE Insurance Group Ltd (ASX: QBE) and Medibank Private Ltd (ASX: MPL) have taken dramatically different directions over the last month, leaving shareholders confused and cautious.
In just the last month QBE's share price has dived 6% lower while Medibank's has soared over 16% following a bumper earnings release that saw Medibank perform better than expected and smash its prospectus guidance for underlying net profit after tax (NPAT). QBE meanwhile, delivered a half-year report that also exceeded expectations on almost every front.
So What? Shareholders need to remember that we're in this for the long term and the one-year chart shows that despite Medibank's recent rise and QBE's fall, the latter remains firmly ahead since Medibank listed last year.
Plaguing the QBE share price appears to be a combination of some concerns surrounding the class action drawn by Maurice Blackburn, the ongoing poor conditions in California, where fires are ravaging potentially insured properties, and weariness that QBE's management declined to upgrade guidance at the half-year result.
QBE's result was ahead of expectations on almost every metric, however, management guided to the company being happy with the original guidance. I took this as a case of management wanting to under-promise with the potential to over-deliver, however, the second half could be tougher with US tornado season about to begin.
Now What? Medibank is on a roll, however as my colleagues pointed out, Medibank is not the best in class just yet when compared to listed rival NIB Holdings Limited (ASX: NHF). With a lower dividend yield and slower growth, investors shouldn't get carried away with Medibank's performance over the next month unless it can keep it up over the next two to three years.
QBE meanwhile, will have to navigate the US storm season and Australian spring unscathed and beat off Maurice Blackburn's class action in order to beat its previous guidance.
