Cincinnati Financial Corporation (CINF Quick QuoteCINF - Free Report) is slated to report first-quarter 2017 results on Apr 26, after the market closes. Last quarter, the company had a positive earnings surprise of 10.29%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Cincinnati Financial’s Commercial Lines Property Casualty Insurance segment is likely to report top-line growth in the to-be-reported quarter. Several growth initiatives as well as a gradual improvement in insurance rates are likely to drive the increase in revenues.    

Further, the property and casualty (P&C) insurer has likely witnessed a rise in premiums earned across all its insurance segments, driven by better pricing.

Also, the P&C insurer may display investment income growth in the first quarter backed by an increase in both interest and dividend income.

However, the company projects pre-tax catastrophe loss of about $106 million for the first quarter. This is likely to result in a deterioration of the combined ratio by 920 basis points (bps) and thus, the company estimates combined ratio between 99% and 101%. Notably, this deterioration will be much higher than 490 bps impact of catastrophe loss during the first quarter in a decade.

Nonetheless, Cincinnati Re has likely experienced growth in the quarter alongside generating P&C underwriting profit.  

The Excess and Surplus line business is also likely to generate underwriting income in the to-be-reported quarter. Despite a challenging market environment, the business is expected to have witnessed an increase in its rates.

With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters with an average beat of 9.17%.

Earnings Whispers

Our proven model does not conclusively show that Cincinnati Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Cincinnati Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 54 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Cincinnati Financial carries a Zacks Rank #3. Though a favorable Zacks Rank increases the predictive power of ESP, we need a positive Earnings ESP to be confident about an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the same space that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

CNA Financial Corporation (CNA Quick QuoteCNA - Free Report) , which is set to report first-quarter earnings on May 1, has an Earnings ESP of +10.13% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Financial Group, Inc. (AFG Quick QuoteAFG - Free Report) has an Earnings ESP of +2.19% and a Zacks Rank #3. The company is set to report first-quarter earnings on May 3.

Third Point Reinsurance Ltd. has an Earnings ESP of +25.32% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 4.

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