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Insurance Stocks to Watch for Earnings on May 5: BRK.B, CI
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The Q1 earnings season has picked up pace with 78.2% members of the elite S&P 500 Index reporting solid quarterly numbers so far. According to the latest Earnings Outlook, the performance of 358 index members that have already reported their financial numbers this quarter indicate that total earnings have increased 12.9% on 7.9% higher revenues. The beat ratio is impressive with 74.3% companies surpassing bottom-line expectations and 65.9% outperforming on the top-line front.
The Finance sector (one of the 16 Zacks sectors) has delivered a strong performance so far. Financial performance of 862% companies from this sector that have revealed their quarterly results shows 9.6% earnings growth on 6.3% increase in revenues, both on a year-over-year basis. The beat ratio of 70.4% for the bottom line is below the S&P 500 but the beat ratio of 66.7% for the top line is higher than that of the S&P 500.
Insurers (particularly the property and casualty companies) are likely to witness improvement in underwriting results owing to a benign catastrophe environment. However, impact of storms in Midwest and the South that occurred during Feb 28 and Mar 22, as well as cyclone Debbie in Australia weighed on underwriting results.
Nonetheless, the improving interest rate, albeit at a slower pace, should cushion investment results that suffered due to the prolonged period of low rates. Owing to a stabilizing economy, improving employment and inflation reaching 2%, the Fed raised interest rates in Dec 2016 and in Mar 2017. Investment income, which is a major component of insurers’ top line, is improving. Also, a stronger economy means more disposable income and better consumer sentiment. This, in turn, is likely to have supported more policy writings, driving premiums higher.
Higher rates should offer some respite to life insurers that suffered spread compression on products like fixed annuities and universal life due to persistently low rates. Investment yield is also likely to have improved. Annuity sales too should have benefited from higher rates.
Prudent underwriting practices should also have supported investors. However, we do not expect pricings to have been strong. Nonetheless, core business growth, geographic expansion, strategic acquisitions and effective capital deployment via share repurchase should prove beneficial for insurers.
Per our earnings outlook, results from the remaining 142 index members should also be impressive. Earnings are estimated to grow 11.9% on 6.2% higher revenues, with Finance, Technology, Industrial Products, Basic Materials, and Business Services on track to achieve double-digit earnings growth.
Let’s find out how these two insurers might perform when they release their quarterly numbers on May 5.
Berkshire Hathaway Inc. (BRK.B - Free Report) is primarily an insurer but also operates railroad systems in North America. In addition, it generates, transmits, and distributes electricity as well as operates natural gas distribution and storage facilities. The company’s Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% complicates surprise prediction. Both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Please note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Improved performance across Manufacturing, Service & Retailing as well as Finance & Financial Products businesses, Burlington Northern SantaFe Corp. and insurance operations should drive results. However, higher expenses due to railroad operations are likely to weigh on margin expansion. (Read more: Berkshire Hathaway Q1 Earnings: What's in the Cards?)
With respect to the surprise trend, Berkshire Hathaway surpassed expectations in two of the last four quarters.
Cigna Corp. (CI - Free Report) , through its subsidiaries, provides health care and related benefits. In the last reported quarter, Cigna beat the Zacks Consensus Estimate by 7.47%. The company has a Zacks Rank #2 (Buy). However, its Earnings ESP of -0.41% complicates surprise prediction. The Most Accurate Estimate stands at $2.43 while the Zacks Consensus Estimate stands at $2.44.
According to our proven model a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or at least 3 (Hold) for an earnings beat.
We expect the company’s Commercial Healthcare business, Global Supplemental Benefits business, and Group Disability & Life segment to post improved results. However, revenues from the Government business are likely to decline due to CMS enrollment sanctions. (Read more: Cigna Q1 Earnings: Is Disappointment in the Cards?)
With respect to the surprise trend, Cigna surpassed expectations in three of the last four quarters but with an average negative surprise of 0.30%
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Insurance Stocks to Watch for Earnings on May 5: BRK.B, CI
The Q1 earnings season has picked up pace with 78.2% members of the elite S&P 500 Index reporting solid quarterly numbers so far. According to the latest Earnings Outlook, the performance of 358 index members that have already reported their financial numbers this quarter indicate that total earnings have increased 12.9% on 7.9% higher revenues. The beat ratio is impressive with 74.3% companies surpassing bottom-line expectations and 65.9% outperforming on the top-line front.
The Finance sector (one of the 16 Zacks sectors) has delivered a strong performance so far. Financial performance of 862% companies from this sector that have revealed their quarterly results shows 9.6% earnings growth on 6.3% increase in revenues, both on a year-over-year basis. The beat ratio of 70.4% for the bottom line is below the S&P 500 but the beat ratio of 66.7% for the top line is higher than that of the S&P 500.
Insurers (particularly the property and casualty companies) are likely to witness improvement in underwriting results owing to a benign catastrophe environment. However, impact of storms in Midwest and the South that occurred during Feb 28 and Mar 22, as well as cyclone Debbie in Australia weighed on underwriting results.
Nonetheless, the improving interest rate, albeit at a slower pace, should cushion investment results that suffered due to the prolonged period of low rates. Owing to a stabilizing economy, improving employment and inflation reaching 2%, the Fed raised interest rates in Dec 2016 and in Mar 2017. Investment income, which is a major component of insurers’ top line, is improving. Also, a stronger economy means more disposable income and better consumer sentiment. This, in turn, is likely to have supported more policy writings, driving premiums higher.
Higher rates should offer some respite to life insurers that suffered spread compression on products like fixed annuities and universal life due to persistently low rates. Investment yield is also likely to have improved. Annuity sales too should have benefited from higher rates.
Prudent underwriting practices should also have supported investors. However, we do not expect pricings to have been strong. Nonetheless, core business growth, geographic expansion, strategic acquisitions and effective capital deployment via share repurchase should prove beneficial for insurers.
Per our earnings outlook, results from the remaining 142 index members should also be impressive. Earnings are estimated to grow 11.9% on 6.2% higher revenues, with Finance, Technology, Industrial Products, Basic Materials, and Business Services on track to achieve double-digit earnings growth.
Let’s find out how these two insurers might perform when they release their quarterly numbers on May 5.
Berkshire Hathaway Inc. (BRK.B - Free Report) is primarily an insurer but also operates railroad systems in North America. In addition, it generates, transmits, and distributes electricity as well as operates natural gas distribution and storage facilities. The company’s Zacks Rank #4 (Sell) and an Earnings ESP of 0.00% complicates surprise prediction. Both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at $1.71. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Please note that the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.
Improved performance across Manufacturing, Service & Retailing as well as Finance & Financial Products businesses, Burlington Northern SantaFe Corp. and insurance operations should drive results. However, higher expenses due to railroad operations are likely to weigh on margin expansion. (Read more: Berkshire Hathaway Q1 Earnings: What's in the Cards?)
With respect to the surprise trend, Berkshire Hathaway surpassed expectations in two of the last four quarters.
Berkshire Hathaway Inc. Price and EPS Surprise
Berkshire Hathaway Inc. Price and EPS Surprise | Berkshire Hathaway Inc. Quote
Cigna Corp. (CI - Free Report) , through its subsidiaries, provides health care and related benefits. In the last reported quarter, Cigna beat the Zacks Consensus Estimate by 7.47%. The company has a Zacks Rank #2 (Buy). However, its Earnings ESP of -0.41% complicates surprise prediction. The Most Accurate Estimate stands at $2.43 while the Zacks Consensus Estimate stands at $2.44.
According to our proven model a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 or at least 3 (Hold) for an earnings beat.
We expect the company’s Commercial Healthcare business, Global Supplemental Benefits business, and Group Disability & Life segment to post improved results. However, revenues from the Government business are likely to decline due to CMS enrollment sanctions. (Read more: Cigna Q1 Earnings: Is Disappointment in the Cards?)
With respect to the surprise trend, Cigna surpassed expectations in three of the last four quarters but with an average negative surprise of 0.30%
Cigna Corporation Price and EPS Surprise
Cigna Corporation Price and EPS Surprise | Cigna Corporation Quote
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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