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What's in Store for Hartford Financial's (HIG) Q2 Earnings?

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The Hartford Financial Services Group, Inc. (HIG - Free Report) will release second-quarter 2020 financial results on Jul 29, after the closing bell.

For the to-be-reported quarter, we expect results to reflect a decline in revenues.

Now let’s see how the company is placed before its upcoming earnings announcement.

Q2 Earnings & Revenue Expectations

The Zacks Consensus Estimate for Hartford Financial’s second-quarter earnings of $1.22 per share implies an 8.3% decrease from the prior-year reported number. Likewise, the consensus estimate for sales of $3.15 billion suggests a 37.2% plunge from the year-ago reported figure.

Factors at Play for Q2 Results

Hartford Financial’s Personal Lines segment is likely to have performed disappointingly in the second quarter due to lower earned premiums, which in turn, might have affected its revenue base. The consensus mark for the same hints at a fall of 14.2% from the year-earlier reported figure. However, the Zacks Consensus Estimate for core earnings from the Personal Lines segment implies a surge of 89.1% from the prior-year reported number.

The company’s small commercial business is expected to have been negatively impacted by reductions and closures in the quarter.
Management at the last earnings call had confirmed that the reduction in new business activity, which continued from March to April, was consistent with the U.S. Census Bureau statistics that predicted a near 25% decline in national new business applications. The company projected a 15% fall in written premiums for the second quarter. For the second quarter, management also talked about its projection for retention and pricing trends to stay on par with the prior quarters in relation to middle, large and specialty markets.

Nevertheless, core earnings from Commercial Lines are likely to have increased on the back of underwriting gain, which in turn, is backed by the consensus mark of $305 million that indicates a 0.3% rise from the year-earlier reported number.

The consensus mark of $2.2 billion for Commercial Line’s earned premiums suggests a 13.1% jump from the year-earlier reported number.

The Zacks Consensus Estimate for core earnings from Group Benefit implies a downside of 22.6% from the respective year-earlier reported numbers.

In the to-be-reported quarter, the company is likely to have witnessed pressure on net investment income. The consensus mark for net investment income from Property and Casualty indicates a downfall of 30.2% from the prior-year reported figure. The consensus estimate for net investment income from Group Benefit implies a deterioration of 28.1% from the year-earlier reported number. During the first-quarter conference call, the company expected yields to be 3.3%, flat with the March-quarter reading.  Market decline in the first quarter might affect the results for the second quarter as limited partnership (LP) returns are reported on a quarter lag.

The company is expected to have incurred high expenses due to investments. Elevated expenses might have weighed on its margins.

What the Quantitative Model States

Our proven model does not conclusively predict an earnings beat for Hartford Financial this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of a positive surprise. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Earnings ESP: Hartford Financial has an Earnings ESP of 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.22.  You can see the complete list of today’s Zacks #1 Rank stocks here.

Zacks Rank: Hartford Financial currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, its 0.00% ESP makes surprise prediction difficult for the stock this time around.

Highlights of Q1 Earnings and Surprise History

Hartford Financial reported earnings of $1.34 per share, beating the Zacks Consensus Estimate by 0.8% on the back of improved revenues. However, the bottom line dipped 3.6% year over year due to softness in income at Talcott Resolution, shrinkage in net investment income, escalated insurance operating costs and other expenses along with short-term disability and paid family leave reserves related to the coronavirus.

The company flaunts an impressive earnings history, having delivered a positive surprise in all the trailing four quarters, the average being 11.6%.

Stocks to Consider

Here are a few stocks worth considering from the same space with the perfect mix of elements to beat on earnings in the respective upcoming releases:

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +11.10% and a Zacks Rank of 3, currently. The company is scheduled to release second-quarter earnings on Aug 4.

American Financial Group (AFG - Free Report) is slated to announce second-quarter earnings on Aug 4. The stock has an Earnings ESP of +21.45% and a Zacks Rank #2 at present.

Lincoln National Corporation (LNC - Free Report) is set to report second-quarter earnings on Aug 5. The stock is currently a #3 Ranked player and has an Earnings ESP of +2.49%.

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