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Will Aflac (AFL) Stock Surprise Investors in Q3 Earnings?
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Supplemental health and life insurer Aflac Inc. (AFL - Free Report) is scheduled to release its third-quarter 2016 financial results after the closing bell on Oct 27. Last quarter, this insurer delivered a 1.8% positive earnings surprise and surpassed the estimates in each of the last four quarters. The average beat for the trailing four quarters is 4.9%.
Will Aflac deliver a positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.
Q3 Flashback
For the third quarter, we expect to see a sharp decline in sales of the first sector products in Japan due to the company’s deliberate action to fight the low interest rate environment over there by reducing the sale of these. The company took a number of measures such as product caps, commission restructuring, product re-pricing in select cases and product discontinuance in the second quarter. These are expected to have a profound effect on sales in this quarter and in the next.
Sales of third sector products are likely to grow as the company is emphasizing these. The introduction of cancer insurance product in the first quarter in this line has been well received in the market place and will contribute to top-line growth.
The company is expected to have witnessed improved underwriting margins on the strength of its franchise in Japan and the U.S. supplemental health markets.
Nevertheless, expenses are expected to flare up in the quarter as the company undertook certain strategic initiatives and increased promotional spend entering the enrollment season.
We also expect to see an increase in hedge costs as the company hedged additional dollar asset classes.
Also, a low interest rate environment will present headwinds to net investment income.
Earnings Whispers
Our proven model does not conclusively show that Aflac is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.
Zacks ESP: Aflac’s Most Accurate estimate is pegged at $1.74 per share, which is in line with the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises
Zacks Rank: Aflac has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
CNA Financial Corp. (CNA - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #2. It will release third-quarter earnings on Oct 31.
American Financial Group Inc. (AFG - Free Report) has an Earnings ESP of +2.61% and a Zacks Rank #3. It will release third-quarter earnings on Nov 1.
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Will Aflac (AFL) Stock Surprise Investors in Q3 Earnings?
Supplemental health and life insurer Aflac Inc. (AFL - Free Report) is scheduled to release its third-quarter 2016 financial results after the closing bell on Oct 27.
Last quarter, this insurer delivered a 1.8% positive earnings surprise and surpassed the estimates in each of the last four quarters. The average beat for the trailing four quarters is 4.9%.
Will Aflac deliver a positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.
Q3 Flashback
For the third quarter, we expect to see a sharp decline in sales of the first sector products in Japan due to the company’s deliberate action to fight the low interest rate environment over there by reducing the sale of these. The company took a number of measures such as product caps, commission restructuring, product re-pricing in select cases and product discontinuance in the second quarter. These are expected to have a profound effect on sales in this quarter and in the next.
Sales of third sector products are likely to grow as the company is emphasizing these. The introduction of cancer insurance product in the first quarter in this line has been well received in the market place and will contribute to top-line growth.
The company is expected to have witnessed improved underwriting margins on the strength of its franchise in Japan and the U.S. supplemental health markets.
Nevertheless, expenses are expected to flare up in the quarter as the company undertook certain strategic initiatives and increased promotional spend entering the enrollment season.
We also expect to see an increase in hedge costs as the company hedged additional dollar asset classes.
Also, a low interest rate environment will present headwinds to net investment income.
Earnings Whispers
Our proven model does not conclusively show that Aflac is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.
Zacks ESP: Aflac’s Most Accurate estimate is pegged at $1.74 per share, which is in line with the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%. Please check our Earnings ESP Filter that enables you to find stocks that are expected to come out with earnings surprises
Zacks Rank: Aflac has a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.
AFLAC INC Price and EPS Surprise
AFLAC INC Price and EPS Surprise | AFLAC INC Quote
Stocks to Consider
Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
RenaissanceRe Holdings Ltd. (RNR - Free Report) will release third-quarter earnings on Nov 1. It has an Earnings ESP of +3.59% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here
CNA Financial Corp. (CNA - Free Report) has an Earnings ESP of +2.38% and a Zacks Rank #2. It will release third-quarter earnings on Oct 31.
American Financial Group Inc. (AFG - Free Report) has an Earnings ESP of +2.61% and a Zacks Rank #3. It will release third-quarter earnings on Nov 1.
Confidential from Zacks
Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>