QBE share price riding on these 3 ‘macro tailwinds’, analysts say

Analysts are constructive on QBE.

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Key points

  • QBE looks well-positioned to benefit from a number of macroeconomic tailwinds
  • Interest rates, higher premiums on crops and commodity insurance, and potential improved climate-risk metrics are all factors
  • In the past 12 months, the QBE share price has climbed 26%

Shares in QBE Insurance Group Ltd (ASX: QBE) are trading at $12.26 apiece, up 1.49% on Thursday.

After some fairly widely-dispersed pricing, QBE stock has managed to thrust itself off a low of $10.08 in March and race higher to its current levels.

Analysts are constructive on the company and reckon it’s well-positioned to benefit from a slew of macro catalysts. Let’s take a look.

TradingView Chart

QBE share price to benefit from macro tailwinds

Analysts at UBS have chimed in on the investment debate for QBE in a recent note to clients. They note the insurer is benefitting from a number of industry-specific and macroeconomic tailwinds, making it the preferred insurance share for UBS.

Writing to clients, UBS analyst Scott Russell said factors such as stronger crop pricing are feeding additional income to QBE via gross written premiums from crop insurance customers.

Not only that, but rising bond yields have the potential to send QBE shares higher, he says.

Meanwhile, analysts at JP Morgan have tied QBE’s outlook to recent events in the bond markets and a strengthening phase in the insurance cycle.

“As a global commercial insurer, QBE is subject to the vagaries of the insurance cycle and volatile natural catastrophes,” the broker wrote.

“Trends in the cycle are currently improving, and there could be further upside from premium rates, providing a tailwind for earnings growth, with investment yields a headwind.”

UBS and JP Morgan each rate QBE as a buy. They value QBE at a price of $15 and $15.50 per share respectively.

Meanwhile, Bloomberg Intelligence analyst Matt Ingram reckons market sentiment has improved for QBE based on its improved climate-risk outlook and its ‘brilliant basics’ program.

He says this could reflect “consensus fiscal 2023 profit that’s more than double mean earnings for the last decade”.

“The higher earnings reflect underwriting and efficiency improvements thanks to the firm’s “brilliant basics” program and better risk selection in the U.S. and European businesses,” he wrote earlier this month.

“The 1.3x price/book ratio represents a 25% discount to IAG, the tightest it has been since 2011, reflecting IAG’s climate-related costs and QBE’s optimism. It remains more expensive than Suncorp despite the latter’s superior profitability,” he added.

What’s the consensus on QBE?

QBE has a consensus valuation of $14.41 per share, according to Bloomberg data. About 91% of analysts covering it rate it a buy right now.

In the past 12 months, the QBE share price has climbed 26%. It is also 9% higher this past month.

JPMorgan Chase is an advertising partner of The Ascent, a Motley Fool company. Motley Fool contributor Zach Bristow has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns and has recommended Insurance Australia Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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