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Travelers (TRV) Q2 Earnings: Is a Surprise in the Offing?
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We expect Property and Casualty (P&C) insurer, The Travelers Companies, Inc. (TRV - Free Report) , to beat expectations when it reports second-quarter 2017 results on Jul 20, before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that Travelers has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.96%. This is because the Most Accurate estimate of $2.10 is higher than the Zacks Consensus Estimate of $2.08. The positive ESP is a leading indicator of a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Travelers carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Travelers’ favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
What is Driving the Better-Than-Expected Earnings?
Travelers is likely to have witnessed net premium growth in its Business and International Insurance, Bond & Specialty Insurance and Personal Insurance businesses in the quarter to be reported. This, in turn, has possibly added to the top line.
The P&C insurer has likely experienced high levels of retention across all business lines, particularly in domestic business insurance and Bond & Specialty Insurance segments. Also, policies in force are estimated to have remained healthy in the second quarter.
In addition, continued share buybacks should have boosted the bottom line.
Moreover, the P&C insurer is likely to have recorded an improved net investment income, mainly driven by a rising interest rate environment as well as higher private equity returns. Yet, management estimated $15–$20 million lower after-tax net investment income on a quarterly basis.
The company is also expected to have displayed better performance at its Agency Auto as well as Agency Homeowners in the quarter awaiting results.
However, higher catastrophe losses and a lower underlying underwriting gain are likely to be dampeners on bottom line.
With respect to the earnings trend, this company delivered positive surprises in three of the last four quarters with an average beat of 4.18%.
The Travelers Companies, Inc. Price and EPS Surprise
Some other companies worth considering from the same space with the right combination of elements to post an earnings beat this quarter are as follows:
W.R. Berkley Corporation (WRB - Free Report) has an Earnings ESP of +2.67% and a Zacks Rank #3. The company is set to report second-quarter earnings on Jul 25.
CNA Financial Corporation (CNA - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #3. The company is slated to report second-quarter earnings on Jul 31.
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Travelers (TRV) Q2 Earnings: Is a Surprise in the Offing?
We expect Property and Casualty (P&C) insurer, The Travelers Companies, Inc. (TRV - Free Report) , to beat expectations when it reports second-quarter 2017 results on Jul 20, before the market opens.
Why a Likely Positive Surprise?
Our proven model shows that Travelers has the right combination of two key ingredients to beat estimates this quarter.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.96%. This is because the Most Accurate estimate of $2.10 is higher than the Zacks Consensus Estimate of $2.08. The positive ESP is a leading indicator of a likely earnings beat. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Travelers carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Travelers’ favorable Zacks Rank and positive Earnings ESP makes us reasonably confident of an earnings beat.
Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
What is Driving the Better-Than-Expected Earnings?
Travelers is likely to have witnessed net premium growth in its Business and International Insurance, Bond & Specialty Insurance and Personal Insurance businesses in the quarter to be reported. This, in turn, has possibly added to the top line.
The P&C insurer has likely experienced high levels of retention across all business lines, particularly in domestic business insurance and Bond & Specialty Insurance segments. Also, policies in force are estimated to have remained healthy in the second quarter.
In addition, continued share buybacks should have boosted the bottom line.
Moreover, the P&C insurer is likely to have recorded an improved net investment income, mainly driven by a rising interest rate environment as well as higher private equity returns. Yet, management estimated $15–$20 million lower after-tax net investment income on a quarterly basis.
The company is also expected to have displayed better performance at its Agency Auto as well as Agency Homeowners in the quarter awaiting results.
However, higher catastrophe losses and a lower underlying underwriting gain are likely to be dampeners on bottom line.
With respect to the earnings trend, this company delivered positive surprises in three of the last four quarters with an average beat of 4.18%.
The Travelers Companies, Inc. Price and EPS Surprise
The Travelers Companies, Inc. Price and EPS Surprise | The Travelers Companies, Inc. Quote
Other Stocks to Consider
Some other companies worth considering from the same space with the right combination of elements to post an earnings beat this quarter are as follows:
Everest Re Group, Ltd. , which is set to report second-quarter earnings on Jul 24, has an Earnings ESP of +2.26% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
W.R. Berkley Corporation (WRB - Free Report) has an Earnings ESP of +2.67% and a Zacks Rank #3. The company is set to report second-quarter earnings on Jul 25.
CNA Financial Corporation (CNA - Free Report) has an Earnings ESP of +4.00% and a Zacks Rank #3. The company is slated to report second-quarter earnings on Jul 31.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look. See the pot trades we're targeting>>