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Will Travelers (TRV) Beat Earnings Estimates This Quarter?

TRV PRA STFC HCI

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The Travelers Companies, Inc. (TRV - Analyst Report) is set to report second-quarter 2013 results on Jul 23. Last quarter it posted a 14.93% surprise. Let’s see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Exposure to catastrophe events is a persistent headwind for property & casualty insurers. The second quarter witnessed tornadoes and hailstorms in the U.S. and flooding in Argentina, Canada and Europe.

Additionally, given the weak interest rate environment, we expect slow improvement in net investment income. However, the company’s efforts to improve performance will likely counter the adverse effects.

Nevertheless, Travelers’ prudent underwriting practices, high retention rate, pricing gains and positive renewal rate changes are expected to aid Travelers deliver better numbers.

Earnings Whispers?

Our proven model does not conclusively show that Travelers is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Positive Zacks ESP:  That is because the Most Accurate Estimate stands at $1.57, while the Zacks Consensus Estimate is higher at $1.58. That is a difference of -0.63%.

Zacks Rank #3 (Hold): Travelers’ Zacks Rank #3 (Hold) increases the predictive power of ESP. However, the Zacks Rank #3 when combined with a negative ESP makes surprise prediction difficult.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

HCI Group, Inc. (HCI - Snapshot Report), Earnings ESP of +66.06% and Zacks Rank #1 (Strong Buy).

ProAssurance Corporation (PRA - Analyst Report), Earnings ESP of +27.63% and Zacks Rank #1 (Strong Buy).

State Auto Financial Corp. (STFC - Snapshot Report), Earnings ESP of +22.58% and Zacks Rank #1 (Strong Buy).
 

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