Travelers Likely to Beat Earnings Ests - Analyst Blog
April 19 2013 - 12:35PM
Zacks
We expect The Travelers Companies, Inc. (TRV)
to beat expectations when it reports first-quarter 2013 results on
Apr 23.
Why a Likely Positive Surprise?
Our proven model shows that the property & casualty insurer is
likely to beat earnings because it has the two key ingredients.
Positive Zacks ESP: Expected Surprise Prediction
or ESP (Read: Zacks Earnings ESP: A Better Method), which
represents the difference between the Most Accurate Estimate and
the Zacks Consensus Estimate, is +1.52%. This is very meaningful
and a leading indicator of a likely positive earnings surprise for
shares.
Zacks Rank #2 (Buy): Note that stocks with a Zacks
Rank of #1, #2 and #3 have a significantly higher chance of beating
earnings. The sell rated stocks (#4 and #5) should never be
considered going into an earnings announcement.
The combination of Travelers’ Zacks Rank # 2 (Buy) and +1.52% ESP
makes us expect a positive earnings beat on Apr 23.
What is Driving the Better Than Expected
Earnings?
Travelers’ prudent underwriting practices, high retention rate,
pricing gains and positive renewal rate changes are expected to
lead to a positive earnings surprise in the upcoming quarter.
Travelers boasts a superior dividend yield and has a strong capital
position.
The positive trend was seen in the trailing four-quarter’s average
surprise of 140.74%, greatly aided by a whopping 500% surprise in
the last-reported quarter. Prudent underwriting practices and
favorable prior-year reserve development managed to arrest the
higher catastrophe losses arising due to Hurricane Sandy. Higher
premiums earned and net investment income aided the
outperformance.
Other Stocks to Consider
Travelers is not the only firm looking up this earnings season. We
also see likely earnings beats coming from these 3 industry
peers:
- Aspen Insurance Holdings Ltd. (AHL), Earnings
ESP of +13.54% and a Zacks Rank #1 (Strong Buy)
- AXIS Capital Holdings Limited (AXS), Earnings
ESP of +4.31% and a Zacks Rank # 2 (Buy)
- W.R. Berkley Corporation (WRB), Earnings ESP
of +2.70% and a Zacks Rank #1 (Strong Buy)
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
AXIS CAP HLDGS (AXS): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis Report
BERKLEY (WR) CP (WRB): Free Stock Analysis Report
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