Insurance Brokers Earnings to Watch on Oct 27: AJG, ERIE, VR

We now have Q3 results from 116 S&P 500 members that combined account for 23.2% of the index’s total market capitalization as per the Earnings Preview article. Total earnings for these companies are up 3.3% from the same period last year on 1.8% higher revenues, with 80.2% beating EPS estimates and 62.9% surpassing top-line expectations.

The Finance sector (one of the 16 Zacks sectors) has started the Q3 earnings season on a strong note. In fact, the financial performance of 33.3% companies from this sector that have already reported their quarterly results indicates 7.9% earnings growth due to a 5.1% increase in revenues, on a year-over-year basis. Moreover, the beat ratios of 90% for the bottom line and 86.7% 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 financial transaction services to name a few.
As far as insurance brokers are concerned, players in the sector will see an earnings upside from their diverse product portfolio and wide geographic reach. Moreover, healthcare and benefits consulting service should add to their top-line growth. Also, premium strong retention levels and growing insured exposure from a slowly improving economic environment might lead to revenue growth. Nevertheless, soft insurance pricing might put pressure on margins.

Here, we take a sneak peek at three insurance broker stocks scheduled to report their third-quarter figures on Oct 27:

Arthur J. Gallagher & Co. AJG, together with its subsidiaries, provides insurance brokerage and risk management services in the United States and internationally. It operates through three segments: Brokerage, Risk Management, and Corporate. Last quarter, the company posted a positive earnings surprise of 1.04%. Cuurently the company carries a Zacks Rank #4 (Sell). For the third quarter, the Most Accurate estimate stands at 73 cents per share, while the Zacks Consensus Estimate stands higher at 76 cents. Hence, Arthur J Gallagher has an Earnings ESP of -3.95%. Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

With respect to the surprise trend, Arthur J Gallagher delivered positive surprises in each of the last four quarters, with an average beat of 8.83%.

Escalating costs (including compensation, operating and interest expenses) are likely to weigh on margins. Also, the company estimates integration costs for the second half of 2016 between 6 cents and 7 cents per share. Adverse forex is likely to hamper bottom-line growth.

However, Arthur J Gallagher’s top line is likely to benefit from robust domestic and international operations as well as strategic acquisitions made by the company in the third quarter. The brokerage segment is expected to post another solid quarter. The company also anticipates organic growth to improve. (Read more: Arthur J Gallagher: Will Q3 Earnings Disappoint?)

GALLAGHER ARTHU Price and EPS Surprise

GALLAGHER ARTHU Price and EPS Surprise | GALLAGHER ARTHU Quote

Erie Indemnity Company ERIE operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. The company provides sales, underwriting, and policy issuance services for policyholders on behalf of the Erie Insurance Exchange. Last quarter, the company posted a positive earnings surprise of 12.5%. The company has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stands at $1.04 per share. The company carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company doesn’t have a respectable earnings surprise trend. It delivered negative surprises in two of the last four quarters, with an average miss of 2.28%.

ERIE INDEMNITY Price and EPS Surprise

ERIE INDEMNITY Price and EPS Surprise | ERIE INDEMNITY Quote

Validus Holdings, Ltd. VR provides reinsurance coverage, insurance coverage and insurance linked securities management services worldwide. It operates through four segments: Validus Re, Talbot, Western World, and AlphaCat. Last quarter, the company posted a negative earnings surprise of 12%. Validus Holdings has an Earnings ESP of 0.00% and a Zacks Rank #3. The Most Accurate estimate stands at $1.04 per share, which is the same as the Zacks Consensus Estimate.

With respect to the surprise trend, Validus Holdings delivered positive surprises in two out of the last four quarters, with an average beat of 2.44%.

VALIDUS HOLDING Price and EPS Surprise

VALIDUS HOLDING Price and EPS Surprise | VALIDUS HOLDING Quote

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ERIE INDEMNITY (ERIE): Free Stock Analysis Report
 
VALIDUS HOLDING (VR): Free Stock Analysis Report
 
GALLAGHER ARTHU (AJG): Free Stock Analysis Report
 
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