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Will Solid Premiums Push Up Travelers (TRV) in Q4 Earnings?
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The Travelers Companies, Inc. (TRV - Free Report) is slated to report fourth-quarter 2018 results on Jan 22 before the market opens. In the last reported quarter, the company came up with a positive earnings surprise of 14.41%.
Let’s see, how things are shaping up for this announcement.
The property and casualty (P&C) insurer is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as substantial growth across its businesses. The Zacks Consensus Estimate for premiums in fourth-quarter 2018 is pegged at $6.9 billion, up 7.6% from the year-ago quarter’s consensus mark.
When it comes to Personal Insurance business, the probable uptick in premiums came on the back of a continued successful execution in Agency Auto and growth in Agency Homeowners.
Further, the insurer’s Business Insurance segment is anticipated to deliver a more than modest performance, primarily fueled by higher earned premium volume and a lower tax rate. Travelers’ commercial businesses are projected to perform well in the yet-to-be-reported quarter on the back of better pricing, prudent strategy execution as well as market stability.
Riding on rising interest rates, the company might have experienced solid investment results in the fourth quarter. Higher private equity returns as well as average level of fixed maturity investments have likely driven investment income. In the fourth quarter of 2018, the insurer estimates the metric to increase in the $60-$65 million range compared with the band recorded in the same period of 2017. The Zacks Consensus Estimate for the metric is pegged at $654 million, representing an 8.8% increase on a year-over-year basis.
On the back of higher premiums and investment income, the company is likely to witness top-line growth in the quarter to be reported. Also, a consistently successful execution of marketplace strategies coupled with strong production results might have led to this probable upside. The Zacks Consensus Estimate is currently pegged at $7.7 billion, reflecting a year-over-year rise of 4.1%.
Further, a lower tax incidence and steady share buybacks are likely to have boosted the P&C insurer’s bottom line in the fourth quarter.
The fourth quarter is expected to bear the brunt of Hurricane Michael (occurring in October) and California wildfires (in November). With the P&C insurer's presence in California, the company is estimated to incur a certain level of catastrophe loss in the yet-to-be-reported quarter. Exposure to catastrophe loss might induce volatility and hamper the company’s overall performance.
However, with the reinsurance coverage in place, Travelers anticipates to mitigate the losses suffered in the aforementioned time period.
Nonetheless, underwriting results are projected to benefit from higher levels of earned premium. The Zacks Consensus Estimate for the combined ratio in the Insurance segment during the fourth quarter is pegged at 96%, flat from the prior-year quarter’s figure.
However, a higher debt-level causing a probable escalation in interest expenses can put pressure on the margin expansion.
What Our Quantitative Model States
Our proven model does not conclusively show that Travelers is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Travelers has an Earnings ESP of -4.61%. This is because the Most Accurate Estimate is pegged at $2.16, lower than the Zacks Consensus Estimate of $2.26. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Travelers Companies, Inc. Price and EPS Surprise
Zacks Rank: Travelers carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. We caution against Sell-rated stocks (4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:
Brown & Brown, Inc. (BRO - Free Report) has an Earnings ESP of +5.38% and a Zacks Rank #2. The company is slated to announce fourth-quarter earnings on Jan 28.
Radian Group Inc. (RDN - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is anticipated to release fourth-quarter earnings on Feb 7.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Will Solid Premiums Push Up Travelers (TRV) in Q4 Earnings?
The Travelers Companies, Inc. (TRV - Free Report) is slated to report fourth-quarter 2018 results on Jan 22 before the market opens. In the last reported quarter, the company came up with a positive earnings surprise of 14.41%.
Let’s see, how things are shaping up for this announcement.
The property and casualty (P&C) insurer is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as substantial growth across its businesses. The Zacks Consensus Estimate for premiums in fourth-quarter 2018 is pegged at $6.9 billion, up 7.6% from the year-ago quarter’s consensus mark.
When it comes to Personal Insurance business, the probable uptick in premiums came on the back of a continued successful execution in Agency Auto and growth in Agency Homeowners.
Further, the insurer’s Business Insurance segment is anticipated to deliver a more than modest performance, primarily fueled by higher earned premium volume and a lower tax rate. Travelers’ commercial businesses are projected to perform well in the yet-to-be-reported quarter on the back of better pricing, prudent strategy execution as well as market stability.
Riding on rising interest rates, the company might have experienced solid investment results in the fourth quarter. Higher private equity returns as well as average level of fixed maturity investments have likely driven investment income. In the fourth quarter of 2018, the insurer estimates the metric to increase in the $60-$65 million range compared with the band recorded in the same period of 2017. The Zacks Consensus Estimate for the metric is pegged at $654 million, representing an 8.8% increase on a year-over-year basis.
On the back of higher premiums and investment income, the company is likely to witness top-line growth in the quarter to be reported. Also, a consistently successful execution of marketplace strategies coupled with strong production results might have led to this probable upside. The Zacks Consensus Estimate is currently pegged at $7.7 billion, reflecting a year-over-year rise of 4.1%.
Further, a lower tax incidence and steady share buybacks are likely to have boosted the P&C insurer’s bottom line in the fourth quarter.
The fourth quarter is expected to bear the brunt of Hurricane Michael (occurring in October) and California wildfires (in November). With the P&C insurer's presence in California, the company is estimated to incur a certain level of catastrophe loss in the yet-to-be-reported quarter. Exposure to catastrophe loss might induce volatility and hamper the company’s overall performance.
However, with the reinsurance coverage in place, Travelers anticipates to mitigate the losses suffered in the aforementioned time period.
Nonetheless, underwriting results are projected to benefit from higher levels of earned premium. The Zacks Consensus Estimate for the combined ratio in the Insurance segment during the fourth quarter is pegged at 96%, flat from the prior-year quarter’s figure.
However, a higher debt-level causing a probable escalation in interest expenses can put pressure on the margin expansion.
What Our Quantitative Model States
Our proven model does not conclusively show that Travelers is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Travelers has an Earnings ESP of -4.61%. This is because the Most Accurate Estimate is pegged at $2.16, lower than the Zacks Consensus Estimate of $2.26. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
The Travelers Companies, Inc. Price and EPS Surprise
The Travelers Companies, Inc. Price and EPS Surprise | The Travelers Companies, Inc. Quote
Zacks Rank: Travelers carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. We caution against Sell-rated stocks (4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:
The Progressive Corporation (PGR - Free Report) is set to report fourth-quarter earnings on Jan 23 and has an Earnings ESP of +1.57%. The company has a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Brown & Brown, Inc. (BRO - Free Report) has an Earnings ESP of +5.38% and a Zacks Rank #2. The company is slated to announce fourth-quarter earnings on Jan 28.
Radian Group Inc. (RDN - Free Report) has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is anticipated to release fourth-quarter earnings on Feb 7.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +21.9% in 2017, our top stock-picking screens have returned +115.0%, +109.3%, +104.9%, +98.6%, and +67.1%.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - 2017, the composite yearly average gain for these strategies has beaten the market more than 19X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>