MBIA Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and MBIA (NYSE: MBI  ) is one of them. The key to making smart investment decisions with stocks releasing their quarterly reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed, kneejerk reaction that turns out to be exactly the wrong move in response to the news.

MBIA found itself near the epicenter of the financial crisis because of its mortgage-insurance business. For years, the insurer has tried to work through its challenges. Let's take an early look at what's been happening with MBIA over the past quarter and what we're likely to see in its quarterly report on Thursday.

Stats on MBIA

Analyst EPS Estimate	$0.16
Year-Ago EPS	($3.23)
Revenue Estimate	$107.5 million
Change From Year-Ago Revenue	(25%)
Earnings Beats in Past 4 Quarters	1

Source: Yahoo! Finance.

Will MBIA insure success going forward?
Analysts haven't been enthusiastic in the past few months about MBIA's prospects, cutting their 2013 full-year guidance nearly in half and shaving $0.04 per share off their earnings consensus for the just-ended quarter. Yet the stock is up more than 13% since late November on hopes for an important legal victory.

MBIA found itself in the wrong industry at the wrong time, with exposure both to mortgage-backed securities and the municipal bond insurance market. During the financial crisis, both segments got hit hard, sending rival Ambac Financial into bankruptcy and knocking the rest of the industry for a loop. Since then, MBIA has worked hard to recover and has regained much of the ground it lost during the crisis.

But lately, MBIA's big issue has been its lawsuit against Bank of America (NYSE: BAC  ) , in which it argues that B of A misrepresented the loans that MBIA ended up insuring, and therefore wants B of A to pay damages. That argument got a big boost when a similar case went in favor of mortgage-insurance company Assured Guaranty (NYSE: AGO  ) , which won a $90 million judgment versus Flagstar Bancorp after the court found that Flagstar had breached warranties and made misrepresentations about securitized loans. MBIA's case is much bigger than Assured Guaranty's and could make a material difference to MBIA's profits.

In its coming report, look for MBIA to give a status report on the lawsuit and possible settlement negotiations. But also, MBIA needs to demonstrate its ability to generate new business, hopefully with better asset quality in order to get its future insurance business up and running. Otherwise, competitors will be ready to swoop in and take MBIA's hard-won market share.�

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