The Q3 earnings season is in its last leg with results from only 15.4% of the S&P Index members left to announce their quarterly results. According to our latest Earnings Preview report, the performance of the 423 index members (accounting for 87.1% of the index’s total market capitalization) that have already reported their financial numbers this quarter indicate that total earnings have improved 3.6% on 2.4% higher revenues, on a year-over-year basis. The beat ratio is also strong with 72.8% companies surpassing bottom-line expectations and 55.1% outperforming on the top-line front.
The Finance sector (one of the 16 Zacks sectors) started the Q3 earnings season on a strong note and now has only 1.1% companies that are yet to report their results. The financial performance of 98.9% companies from this sector indicates 12.7% earnings growth due to a 6.7% increase in revenues, on a year-over-year basis. Moreover, the beat ratios of 73% for the bottom line and 75.3% for the top line compare favorably with the S&P 500.
The Finance sector is highly diversified and includes several industries like insurance, banks and securities exchanges to name a few.
Like other insurance companies, life insurers too continue to be affected by a low interest rate environment. The persistently weak interest rates have been weighing on investment results for quite some time now. Nonetheless, spread compression on products like fixed annuities and universal life are expected improve. Also, life insurers have lowered their interest-sensitive product lines to better deal with the unfavorable conditions.
Life insurers have braced their portfolio by redesigning and re-pricing products that have the potential to help in writing higher premiums. This apart, lowering of underwriting expenses should support bottom-line growth.
In addition, stronger corporate bonds and improving real estate market should help credit-related investment losses to remain low. Also, improving employment scenario and economic recovery should drive disposable income. These, in turn, should increase demand for life insurance and annuity products.
As many as 645 companies, including 31 index members, are due to report their results this week. Let’s take a look at how these two life insurers might fare when they report their Q3 numbers on Nov 9.
Sun Life Financial Inc. (SLF - Free Report) is the third-largest insurer in Canada. The company provides protection as well as wealth products and services to individuals and corporate customers worldwide. The company delivered a positive earnings surprise of 1.47% in the last quarter. Sun Life’s has a Zacks Rank #4 (Sell) and an Earnings ESP of 0.00%. Please note that we caution against stocks with Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
With respect to the surprise trend, Sun Life beat expectations in three of the last four quarters with an average beat of 3.95%. The Zacks Consensus Estimate for Q3 is pegged at 70 cents per share. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Primerica, Inc. (PRI - Free Report) is a distributor of financial products to middle income households in the U.S. and Canada. The company delivered a positive earnings surprise of 19.64% in the last quarter. According to our quantitative model, a company needs the right combination of two key ingredients – a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) – to increase its odds of an earnings surprise. Primerica’s Earnings ESP of 0.00% makes surprise prediction difficult in spite of the company’s Zacks Rank #3. You can see the complete list of today’s Zacks Rank #1 stocks here.
With respect to the surprise trend, Primerica beat expectations in all the last four quarters with an average beat of 5.73%. The Zacks Consensus Estimate for Q3 is pegged at $1.1 per share.
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