Back to top

Image: Bigstock

Will Aflac (AFL) Retain Positive Earnings Surprise in Q1?

Read MoreHide Full Article

Aflac Inc. (AFL - Free Report) is scheduled to announce first-quarter 2019 results on Apr 25, after the closing bell. Its quarterly revenues and earnings are expected to improve year over year, partly offset by an increase in expense.

The Zacks Consensus Estimate for earnings is $1.05 per share, unchanged from the year-ago quarter, and revenues of $5.48 billion, which translate into year-over-year growth of a mere 0.31%.

Factors to Affect Q1 Results

We expect to see continued strength in the profitability of Aflac U.S., led by ongoing investment in the business, delivery of value-added services and increased client retention, product partnering to drive improved account values and employee access, and investment in administrative capabilities. The Zacks Consensus Estimate for revenues at the U.S. unit is $1.65 billion, up 3.1% year over year.

However, sales in its Japan business will remain subdued due to decline in third-sector and first-sector protection sales, following a strong cancer product launch in 2018. Also, continued reduction in first-sector savings products as expected by the company, after re-pricing in April 2017, should lead to an overall decline in sales.  Net earned premium is expected to decline as first-sector savings policies become paid-up (paid-up means when all the premium payments are complete and the insurer will not receive any premium on those policies). The Zacks Consensus Estimate for revenues at the Japan unit is $3.79 billion, down 3.1% year over year.

Investment income performance, both in Japan and the United States, should be strong driven primarily by accelerated growth in the company’s floating rate portfolio, benefiting from higher LIBOR rates.

The company has increased its investment in core technology platforms and growth initiatives to drive performance and achieve operating effectiveness. This investment will continue to be a strategic focus through 2019.

Also, the company’s continued efforts to return capital to its shareholders via share buyback will be accretive to its bottom line.

Earnings Surprise History

The company boasts an attractive earnings surprise history, having surpassed estimate in each of the trailing four quarters, with an average positive surprise of 7.5%. This is depicted in the chart below:

Aflac Incorporated Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that Aflac is likely to beat on earnings this quarter. 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: Aflac has an Earnings ESP of +0.57%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aflac carries a Zacks Rank #3.

Other Stocks Worth Considering

Some other stocks from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:

Amerisafe, Inc. (AMSF - Free Report) with an Earnings ESP of +2.6% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate Corp. (ALL - Free Report) with an Earnings ESP of +5.08% and a Zacks Rank #3.

Prudential Financial, Inc. (PRU - Free Report) with an Earnings ESP of +1.21% and a Zacks Rank #2.

Is Your Investment Advisor Fumbling Your Financial Future?

See how you can more effectively safeguard your retirement with a new Special Report, “4 Warning Signs Your Investment Advisor Might Be Sabotaging Your Financial Future.”

Click to get it free >>
 

Published in