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Travelers (TRV): Will it Spring a Surprise with Q4 Earnings? - Analyst Blog

Zacks Equity Research
Updated

We expect property and casualty insurer The Travelers Companies, Inc. (TRV) to beat expectations when it reports fourth-quarter and full-year 2014 results on Jan 22, 2015.

Why a Likely Positive Surprise?

Our proven model shows that Travelers is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is at +0.40%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: Travelers carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank of #1, 2 or 3 have a significantly higher chance of beating earnings.

The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.  

What is Driving the Better-Than-Expected Earnings?

Last quarter witnessed a favorable catastrophe environment inducing better underwriting performance. Positive pricing actions supported by a favorable rate environment and a product portfolio with better performing classes of business will add to the upside. Acquisitions continue to back its performance. Continued share repurchases will also boost the bottom line.

Since the interest rate environment is still soft, investment income from the non-fixed maturity portfolio in 2014 is likely to be lower than the 2013 level. Management also projected that lower reinvestment yields from the fixed-maturity portfolio would lower net investment income by $20 million in the quarter to be reported.

Travelers outperformed the Zacks Consensus Estimate thrice in the last four quarters, with an average surprise of 18.58%.

Other Stocks to Consider

Here are some other companies you may want to consider as these too have the right combination of elements to post an earnings beat this quarter:  

The Chubb Corporation (CB), Earnings ESP of +1.39% and a Zacks Rank #1 (Strong Buy).

The Allstate Corporation (ALL), Earnings ESP of +3.05% and a Zacks Rank #1.

ACE Ltd. (ACE), Earnings ESP of +2.64% and a Zacks Rank #3 (Hold).
 


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TRAVELERS COS (TRV): Free Stock Analysis Report
 
CHUBB CORP (CB): Free Stock Analysis Report
 
ACE LIMITED (ACE): Free Stock Analysis Report
 
ALLSTATE CORP (ALL): Free Stock Analysis Report
 
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Zacks Investment Research