We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Can Higher Premiums Drive Travelers' (TRV) Q3 Earnings?
Read MoreHide Full Article
The Travelers Companies, Inc. (TRV - Free Report) is slated to report third-quarter 2018 results on Oct 18 before the market opens. Last reported quarter, the company came up with a negative earnings surprise of 25.51%.
Let’s see, how things are shaping up for this announcement.
The property and casualty (P&C) insurer is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as significant growth across its businesses. Additionally, the company has likely witnessed an increase in premiums across its segments, contributing to a probable rise in the metric. The Zacks Consensus Estimate for premiums in third-quarter 2018 is pegged at $6.8 billion, up 1.8% from the year-ago quarter’s consensus mark.
Also, on the back of rising interest rates, the company might have experienced better investment results in the to-be-reported quarter. This apart, the insurer has likely reported higher investment income owing to higher private equity returns, growth in fixed income portfolio size, driven by a probable increase in short-term rates and a higher level of invested assets. In fact, the Zacks Consensus Estimate for the metric is pegged at $602 million, representing an increase of 2.4% on a year-over-year basis.
On the back of higher premiums as well as investment income, the company is likely to witness top-line growth in the quarter to be reported. Also, a consistently successful execution of marketplace strategies might lead to this probable improvement. The Zacks Consensus Estimate is currently pegged at $7.5 billion, reflecting a year-over-year improvement of 3.9%.
Further, lower tax incidence and continued share buybacks are likely to have lent a boost to the P&C insurer’s bottom line in the third quarter. The consensus estimate for the metric stands at $2.24, up 146.2% year over year.
The company’s Business Insurance segment is anticipated to deliver a better -than-decent performance, primarily fueled by a lower tax rate along with higher earned premium volume. Travelers’ commercial businesses are projected to perform well in the yet-to-be-reported quarter on the back of improved pricing, prudent strategy execution as well as market stability.
The third quarter is expected to bear the brunt of Hurricane Florence (occurring in September) and Travelers is also estimated to incur a certain level of catastrophe loss during this time period. Per Citigroup analysts, Travelers is projected to incur approximately $42 million loss for each $1 billion in insured losses due to its substantial presence in North Carolina where the hurricane made its landfall. Exposure to catastrophe loss might induce volatility and hamper the company’s overall performance.
Nonetheless, underwriting results are projected to benefit from higher levels of earned premium. The Zacks Consensus Estimate for the combined ratio in the Insurance segment is pegged at 97%, reflecting an improvement of 1300 basis points from the prior-year quarter’s figure.
However, a higher debt-level inducing a probable increase in interest expenses can put pressure on the margin expansion.
What Our Quantitative Model States
Our proven model does not conclusively show that Travelers is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Travelers has an Earnings ESP of -2.57%. This is because the Most Accurate Estimate is pegged at $2.19, lower than the Zacks Consensus Estimate of $2.24. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Travelers Companies, Inc. Price and EPS Surprise
Zacks Rank: Travelers carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company needs to have a positive ESP to be confident about an earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.
We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks worth considering from the same space with the right combination of elements to surpass estimates this time around are as follows:
Everest Re Group, Ltd. has an Earnings ESP of +10.43% and a Zacks Rank of 3. The company is set to announce third-quarter earnings on Oct 29.
RenaissanceRe Holdings Ltd. (RNR - Free Report) has an Earnings ESP of +0.73% and is a #3 Ranked player. The company is set to announce third-quarter earnings on Oct 30.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Image: Bigstock
Can Higher Premiums Drive Travelers' (TRV) Q3 Earnings?
The Travelers Companies, Inc. (TRV - Free Report) is slated to report third-quarter 2018 results on Oct 18 before the market opens. Last reported quarter, the company came up with a negative earnings surprise of 25.51%.
Let’s see, how things are shaping up for this announcement.
The property and casualty (P&C) insurer is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as significant growth across its businesses. Additionally, the company has likely witnessed an increase in premiums across its segments, contributing to a probable rise in the metric. The Zacks Consensus Estimate for premiums in third-quarter 2018 is pegged at $6.8 billion, up 1.8% from the year-ago quarter’s consensus mark.
Also, on the back of rising interest rates, the company might have experienced better investment results in the to-be-reported quarter. This apart, the insurer has likely reported higher investment income owing to higher private equity returns, growth in fixed income portfolio size, driven by a probable increase in short-term rates and a higher level of invested assets. In fact, the Zacks Consensus Estimate for the metric is pegged at $602 million, representing an increase of 2.4% on a year-over-year basis.
On the back of higher premiums as well as investment income, the company is likely to witness top-line growth in the quarter to be reported. Also, a consistently successful execution of marketplace strategies might lead to this probable improvement. The Zacks Consensus Estimate is currently pegged at $7.5 billion, reflecting a year-over-year improvement of 3.9%.
Further, lower tax incidence and continued share buybacks are likely to have lent a boost to the P&C insurer’s bottom line in the third quarter. The consensus estimate for the metric stands at $2.24, up 146.2% year over year.
The company’s Business Insurance segment is anticipated to deliver a better -than-decent performance, primarily fueled by a lower tax rate along with higher earned premium volume. Travelers’ commercial businesses are projected to perform well in the yet-to-be-reported quarter on the back of improved pricing, prudent strategy execution as well as market stability.
The third quarter is expected to bear the brunt of Hurricane Florence (occurring in September) and Travelers is also estimated to incur a certain level of catastrophe loss during this time period. Per Citigroup analysts, Travelers is projected to incur approximately $42 million loss for each $1 billion in insured losses due to its substantial presence in North Carolina where the hurricane made its landfall. Exposure to catastrophe loss might induce volatility and hamper the company’s overall performance.
Nonetheless, underwriting results are projected to benefit from higher levels of earned premium. The Zacks Consensus Estimate for the combined ratio in the Insurance segment is pegged at 97%, reflecting an improvement of 1300 basis points from the prior-year quarter’s figure.
However, a higher debt-level inducing a probable increase in interest expenses can put pressure on the margin expansion.
What Our Quantitative Model States
Our proven model does not conclusively show that Travelers is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Travelers has an Earnings ESP of -2.57%. This is because the Most Accurate Estimate is pegged at $2.19, lower than the Zacks Consensus Estimate of $2.24. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Travelers Companies, Inc. Price and EPS Surprise
The Travelers Companies, Inc. Price and EPS Surprise | The Travelers Companies, Inc. Quote
Zacks Rank: Travelers carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company needs to have a positive ESP to be confident about an earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.
We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks worth considering from the same space with the right combination of elements to surpass estimates this time around are as follows:
AXIS Capital Holdings Limited (AXS - Free Report) is set to report third-quarter earnings on Oct 24 and has an Earnings ESP of +3.78%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
Everest Re Group, Ltd. has an Earnings ESP of +10.43% and a Zacks Rank of 3. The company is set to announce third-quarter earnings on Oct 29.
RenaissanceRe Holdings Ltd. (RNR - Free Report) has an Earnings ESP of +0.73% and is a #3 Ranked player. The company is set to announce third-quarter earnings on Oct 30.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.
Click here for the 6 trades >>