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Is a Beat in the Cards for Assurant (AIZ) in Q2 Earnings?

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Assurant, Inc. (AIZ - Free Report) is slated to report second-quarter 2018 results on Aug 7 after the market closes. Last reported quarter, the company delivered a positive earnings surprise of 5.82%.

Let’s see, how things are shaping up for this announcement.

Assurant is likely to report bottom-line growth in the to-be-reported quarter, mainly driven by a lower tax rate along with modest underlying profitable growth in the company’s important businesses such as, mobile business and multi-family housing. In fact, the Zacks Consensus Estimate for earnings is pegged at $1.89, reflecting a year-over-year improvement of nearly 16%.

Also, continued share buybacks has likely given a boost to the probable improvement.

With respect to investment results, we expect the company to experience growth in the same owing to slow but steady increase in interest rates.

Riding on the strength of better investment results along with a possible improvement in premiums earned, fees and other income, the company has probably witnessed higher revenues in the second quarter. To that end, the consensus mark for the metric is currently pegged at $1.8 billion, representing an increase of 13.5% from the year-ago quarter’s tally.

The company might have experienced a solid performance at its Global Lifestyle business in the quarter to be reported. Better-than-expected earnings results and margin expansion have probably been witnessed owing to a combination of profitable growth and operating efficiencies worldwide.

Further, the top line at Global Lifestyle has likely shown an improvement in the second quarter, fueled by sustained profitable growth in its vehicle protection business that has been driven by probable higher sales volume. Moreover, the segment is likely to have delivered net operating income growth on the back of newly introduced mobile programs as well as higher contributions from vehicle protection and expense efficiencies.

The company has likely displayed solid revenues and earnings growth in its multi-family housing business, mainly attributable to the growing number of insured renters (currently having over 1.8 million insured renters).

Fee-based capital-light businesses, which form integral part of 52% segmental revenues, are expected to deliver double-digit growth while expansion in fee-based offerings is anticipated to boost the company’s return on equity (ROE).

However, the company might have incurred higher expenses, mainly due to a possible increase in policyholder benefits, selling, underwriting, general and administrative expenses plus interest expense. This in turn, will perhaps weigh on the property and casualty (P&C) insurer’s operating margin expansion.

Also, as a P&C insurer, Assurant is prone to the after effects of catastrophe loss and we expect the second quarter not be an exception. Probable incurrence of catastrophe loss might affect the company’s underwriting performance, thus rendering volatility to the company’s overall results.

What Our Quantitative Model States

Our proven model shows that Assurant is likely to beat on earnings this to-be-reported quarter. This is because the stock has the perfect combination of a positive Earnings ESP as well as a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Assurant has an Earnings ESP of +1.94%. This is because the Most Accurate Estimate is pegged at $1.93, higher than the Zacks Consensus Estimate of $1.89. A positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Assurant, Inc. Price and EPS Surprise

 

Assurant, Inc. Price and EPS Surprise | Assurant, Inc. Quote

Zacks Rank: Assurant carries a Zacks Rank #3, which increases the predictive power of ESP. Further with a positive ESP, the stock’s chances of an earnings beat this season are significantly higher.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the finance sector with the right combination of elements to also surpass estimates this time around are as follows:

TCP Capital Corp. (TCPC - Free Report) is set to report second-quarter earnings on Aug 8 and has an Earnings ESP of +1.01%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Starwood Property Trust, Inc. (STWD - Free Report) has an Earnings ESP of +1.25% and a Zacks Rank #2. The company is set to announce second-quarter earnings on Aug 8.   

PennantPark Floating Rate Capital Ltd. (PFLT - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank of 3. The company is expected to announce second-quarter earnings on Aug 14.

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