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Chubb Limited (CB) Q2 Earnings: Is a Beat in the Cards?

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Chubb Limited (CB - Free Report) is slated to report second-quarter 2018 results on Jul 24 after the market closes. Last reported quarter, the company delivered a positive earnings surprise of 4.46%.

Let’s see, how things are shaping up for this announcement.

The property and casualty (P&C) insurer is likely to report premium growth in the soon-to-be-reported quarter, driven by an improved commercial property and casualty (P&C) pricing across its numerous business lines as well as a compelling product portfolio. Additionally, the company has possibly witnessed higher premiums across its segments, contributing to a probable rise in the metric.

Also, strategic buyouts are expected to have contributed to this probable uptick in premiums. The Zacks Consensus Estimate for premiums in second quarter is pegged at $7.5 billion, up 11.3% from the year-ago period’s consensus mark.

Owing to the slow but steady improvement in interest rates along with better-than-expected private equity distributions, the company might have experienced better investment results in the to-be-reported quarter. In fact, the Zacks Consensus Estimate is pegged at $798 million, representing a rise of 3.6% on a year-over-year basis. Notably, the company anticipates quarterly investment income run rate to range between $875 million and $885 million.

Riding on the strength of higher premiums as well as investment income, the company is likely to witness top-line growth in the quarter to be reported.

Further, lower tax incidence and continued share buybacks are likely to have cushioned the P&C insurer’s bottom line in the second quarter. The consensus estimate for the metric stands at $2.63, up 5.2% year over year.

With the company expecting to incur a lower level of catastrophe loss, underwriting results are anticipated to display substantial improvement in the soon-to-be-reported quarter. The Zacks Consensus Estimate for combined ratio is pegged at 88%, remaining unchanged from the year-ago quarter.

Chubb has probably displayed higher renewal retention rates and new business volume growth in the soon-to-be-reported quarter, backed by sustained operational performance.

However, the company might have incurred increased expenses, mainly due to higher loss and loss expenses, policy acquisition costs, administrative expenses as well as policy benefits. This in turn, will perhaps weigh on the P&C insurer’s operating margin expansion.   

What Our Quantitative Model States

Our proven model shows that Chubb is likely to beat on earnings this to-be-reported quarter. This is because the stock has the perfect combination of a positive Earnings ESP as well as a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Zacks ESP: Chubb has an Earnings ESP of +1.16%. This is because the Most Accurate Estimate is pegged at $2.66, higher than the Zacks Consensus Estimate of $2.63. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Chubb Limited Price and EPS Surprise

 

Chubb Limited Price and EPS Surprise | Chubb Limited Quote

Zacks Rank: Chubb carries a Zacks Rank #3, which increases the predictive power of ESP.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the same space with the right combination of elements to also surpass estimates this time around are as follows:

XL Group Ltd. is set to report second-quarter earnings on Jul 31 and has an Earnings ESP of +6.37%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +1.49% and a Zacks Rank of 3. The company is set to announce second-quarter earnings on Aug 1.

American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +1.68% and a Zacks Rank of 2. The company is set to announce second-quarter earnings on Aug 1.

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