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CNA Financial (CNA) Q2 Earnings: Disappointment in Store?

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CNA Financial Corporation (CNA - Free Report) is set to report second-quarter 2016 results on Aug 1, before the market opens. Last quarter, the company posted a positive earnings surprise of 6.67%. Let’s see how things are shaping up for this announcement.
 
Factors to be Considered this Quarter

CNA Financial is likely to witness a decline in net operating income in the to-be-reported quarter, primarily due to lower limited partnership investment income.

In addition, the property and casualty (P&C) insurer has estimated substantial catastrophe losses in the to-be-reported quarter, which in turn, is likely to adversely affect the its results. However, favorable loss development across all of P&C segments and sustained improvement in underlying loss ratio are expected to be respites.

Also, the company might display growth in its commercial segment driven by its focus and commitment to underwriting discipline.

Interest expense could be lower owing to lower coupon rate of interest on debts issued.

With respect to surprise trend, the company missed estimates in two of the last four quarters with an average negative earnings surprise of 34.18%.

CNA FINL CORP Price and EPS Surprise

CNA FINL CORP Price and EPS Surprise | CNA FINL CORP Quote

Earnings Whispers

Our proven model does not conclusively show that CNA Financial is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: CNA Financial has an Earnings ESP of -5.56%. This is because the Most Accurate estimate is pegged at 68 cents, while the Zacks Consensus Estimate stands at 72 cents.

Zacks Rank: CNA Financial carries a Zacks Rank #4 (Sell).

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Currently, the stock is trading at $32.07. We expect the result announcement to lead to stock movement.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +7.55% and a Zacks Rank #3. The company is set to report second-quarter earnings on Aug 3.  

Manulife Financial Corporation (MFC - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report second-quarter earnings on Aug 4.

Willis Towers Watson Public Limited Company has an Earnings ESP of +10.06% and a Zacks Rank #3. The company is slated to report second-quarter earnings on Aug 5.

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