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What's in the Offing for Aflac (AFL) This Earnings Season?
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Aflac Inc.’s (AFL - Free Report) first-quarter 2020 results are scheduled on Apr 29, after the closing bell. The company’s earnings performance is likely to have been affected by lower returns from its Japan business, partially offset by gains from U.S business. Decline in investment income due to soft interest rates is also expected to have been a concern.
In the second half of 2019 and the first quarter of 2020, both JPI and JPC (collectively accounting for approximately 25% of Aflac Japan’s third-sector sales in 2019), which are an affiliate of Japan Post Holdings, were found guilty of business malpractices and were put on three month suspension (starting Dec 27, 2019) to sell JPI insurance products. The investigation into the units’ misconduct is currently underway and will possibly be completed by June-end.
Consequently, there persists an uncertainty over the re-initiation of JPI insurance product sales. Management believes that sales of Aflac Japan cancer insurance through JPC and JPI are unlikely to return to 2018 levels in the near term. For 2020, the company expects a decline in the 0.7% range within third and first-sector protection earned premiums. The first-quarter earnings results from Japan are thus likely to reflect a subdued picture.
Nevertheless, Aflac U.S.’ consistent strength is expected to be a continued trend in the impending first-quarter release. The company undertook a number of growth initiatives, such as boosting Dental and Vision business, building the Consumer Market platform, fortifying the agent channel, etc. These efforts are expected to have aided the segment’s earnings.
Meanwhile, the company is heavily investing in digital endeavors designed to accelerate development, drive sales, strengthen administration and enhance customer experience in relation to its product line. These measures are diverse and may induce elevated near-term expense ratios.
While the expense level is anticipated to remain steep in 2020 and 2021, the same will expectedly trend down beginning 2022 as the top line by then will start improving in response to the company’s key moves and its expense control generating efficiency in the form of sturdy margins. Until then, we can only anticipate seeing squeezed margins in the upcoming March-quarter results.
During the first quarter, the company hiked its quarterly dividend by 3.7% (over the fourth quarter of 2019). This raise marks the 37th consecutive year of dividend increase.
Earnings & Revenue Expectations
The Zacks Consensus Estimate for Aflac’s first-quarter earnings of $1.11 per share indicates a 0.89% dip from the prior-year reported number. Likewise, the consensus estimate for sales of $5.5 billion suggests a 2.8% slip from the prior-year reported number.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the last four quarters, the average being 5.67%. This is depicted in the chart below:
Our proven model does not conclusively predict an earnings beat for Aflac this time around. The right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — increases the odds of a positive surprise, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Aflac has an Earnings ESP of -0.18%.
Zacks Rank: Aflac currently carries a Zacks Rank #3.
Here are some stocks worth considering in the insurance sector as our model shows that these too have the perfect combination of elements to beat on earnings this season:
American International Group Inc. (AIG - Free Report) has an Earnings ESP of +1.60% and a Zacks Rank of 3.
Cincinnati Financial Corporation (CINF - Free Report) has an Earnings ESP of +1.67% and is Zacks #3 Ranked.
Kemper Corp. (KMPR - Free Report) has an Earnings ESP of +12.57% and is #3 Ranked.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
Image: Bigstock
What's in the Offing for Aflac (AFL) This Earnings Season?
Aflac Inc.’s (AFL - Free Report) first-quarter 2020 results are scheduled on Apr 29, after the closing bell. The company’s earnings performance is likely to have been affected by lower returns from its Japan business, partially offset by gains from U.S business. Decline in investment income due to soft interest rates is also expected to have been a concern.
In the second half of 2019 and the first quarter of 2020, both JPI and JPC (collectively accounting for approximately 25% of Aflac Japan’s third-sector sales in 2019), which are an affiliate of Japan Post Holdings, were found guilty of business malpractices and were put on three month suspension (starting Dec 27, 2019) to sell JPI insurance products. The investigation into the units’ misconduct is currently underway and will possibly be completed by June-end.
Consequently, there persists an uncertainty over the re-initiation of JPI insurance product sales. Management believes that sales of Aflac Japan cancer insurance through JPC and JPI are unlikely to return to 2018 levels in the near term. For 2020, the company expects a decline in the 0.7% range within third and first-sector protection earned premiums. The first-quarter earnings results from Japan are thus likely to reflect a subdued picture.
Nevertheless, Aflac U.S.’ consistent strength is expected to be a continued trend in the impending first-quarter release. The company undertook a number of growth initiatives, such as boosting Dental and Vision business, building the Consumer Market platform, fortifying the agent channel, etc. These efforts are expected to have aided the segment’s earnings.
Meanwhile, the company is heavily investing in digital endeavors designed to accelerate development, drive sales, strengthen administration and enhance customer experience in relation to its product line. These measures are diverse and may induce elevated near-term expense ratios.
While the expense level is anticipated to remain steep in 2020 and 2021, the same will expectedly trend down beginning 2022 as the top line by then will start improving in response to the company’s key moves and its expense control generating efficiency in the form of sturdy margins. Until then, we can only anticipate seeing squeezed margins in the upcoming March-quarter results.
During the first quarter, the company hiked its quarterly dividend by 3.7% (over the fourth quarter of 2019). This raise marks the 37th consecutive year of dividend increase.
Earnings & Revenue Expectations
The Zacks Consensus Estimate for Aflac’s first-quarter earnings of $1.11 per share indicates a 0.89% dip from the prior-year reported number. Likewise, the consensus estimate for sales of $5.5 billion suggests a 2.8% slip from the prior-year reported number.
Earnings Surprise History
The company boasts an attractive earnings surprise history, having surpassed estimates in each of the last four quarters, the average being 5.67%. This is depicted in the chart below:
Aflac Incorporated Price and EPS Surprise
Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote
Here is what our quantitative model predicts:
Our proven model does not conclusively predict an earnings beat for Aflac this time around. The right combination of the two key ingredients — a positive Earnings ESP and Zacks Rank #3 (Hold) or better — increases the odds of a positive surprise, which is not the case here.
You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Earnings ESP: Aflac has an Earnings ESP of -0.18%.
Zacks Rank: Aflac currently carries a Zacks Rank #3.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks That Warrant a Look
Here are some stocks worth considering in the insurance sector as our model shows that these too have the perfect combination of elements to beat on earnings this season:
American International Group Inc. (AIG - Free Report) has an Earnings ESP of +1.60% and a Zacks Rank of 3.
Cincinnati Financial Corporation (CINF - Free Report) has an Earnings ESP of +1.67% and is Zacks #3 Ranked.
Kemper Corp. (KMPR - Free Report) has an Earnings ESP of +12.57% and is #3 Ranked.
Biggest Tech Breakthrough in a Generation
Be among the early investors in the new type of device that experts say could impact society as much as the discovery of electricity. Current technology will soon be outdated and replaced by these new devices. In the process, it’s expected to create 22 million jobs and generate $12.3 trillion in activity.
A select few stocks could skyrocket the most as rollout accelerates for this new tech. Early investors could see gains similar to buying Microsoft in the 1990s. Zacks’ just-released special report reveals 8 stocks to watch. The report is only available for a limited time.
See 8 breakthrough stocks now>>