Back to top

Analyst Blog

The Travelers Companies, Inc. (TRV - Analyst Report) is set to report its second-quarter 2014 results on July 22. Last quarter, the company posted a 38.5% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors Influencing This Past Quarter

Underwriting results at Travelers is expected benefit from a benign catastrophe environment, which drove underwriting results. Improved pricing due to a favorable rate environment is also expected to lead to an upside in the quarter to be reported.

Continued share repurchase will also boost the bottom line.

However, a soft interest rate environment continues to be a drag on the investment results. Management expects lower reinvestment yields from fixed maturity portfolio to lower net investment income from that portfolio by $25 million in each of the remaining quarters of 2014.

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 and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Travelers has an Earnings ESP of -0.97%. That is because the Most Accurate estimate stands at $2.03 while the Zacks Consensus Estimate is higher at $2.05.

Zacks Rank: Travelers’ Zacks Rank #2 (Buy) increases the predictive power of ESP. However, we also need to have a positive ESP to be confident about an earnings surprise.

Other Stocks to Consider

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

Everest Re Group Ltd. (RE - Analyst Report), earnings ESP of +3.75% and a Zacks Rank #2 (Buy).

ACE Ltd. (ACE - Analyst Report), earnings ESP of +0.89% and a Zacks Rank #3 (Hold).

Allied World Assurance Company Holdings, AG (AWH - Snapshot Report) earnings ESP of +3.75% and a Zacks Rank #3.

Please login to Zacks.com or register to post a comment.