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Travelers (TRV) Set to Beat on Q1 Earnings: Stock in Focus

We expect property and casualty insurer The Travelers Companies, Inc. TRV to beat expectations when it reports first-quarter results on Apr 21 before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Travelers Companies 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 +3.49%. This is because the Most Accurate estimate of $2.67 is pegged higher than the Zacks Consensus Estimate of $2.58. The positive ESP is a meaningful indicator of a likely positive earnings surprise for the company.

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

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

What is Driving the Better-Than-Expected Earnings?

Travelers is likely to have witnessed higher agency auto premiums as well as strong policies in force in the to-be-reported quarter. Personal Lines is expected to have benefitted from its Quantum Auto 2.0. Premiums should have also benefitted from its prudent pricing strategy.

Given the still soft interest rate environment, fixed income yield is estimated to have remained low. Lower reinvestment yields and a lower level of fixed maturity investments may have weighed on net investment income.

The Business Insurance and International, Bond and Specialty and Personal Lines segments are likely to have witnessed favorable reserve development.

While a benign catastrophe environment should favor underwriting results, cost-reduction initiatives are likely to lead to margin expansion. We also expect the quarter’s performance to be driven by strategic acquisitions that bore fruit.

Additionally, the company’s continued share repurchase should add to its bottom line.

Travelers Companies delivered earnings surprises in three of last four quarters, with an average beat of 14.32%.

 

 

 

 

 

 

 

 

Travelers’ share price has been on an uptrend over the last few days. We wait to see how the stock reacts to the company’s first-quarter performance.

Other Stocks to Consider

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

Aspen Insurance Holdings Ltd.  AHL has an Earnings ESP of +5.60% and a Zacks Rank #3. The company is scheduled to report first-quarter earnings results on Apr 21, 2016.

First American Financial Corporation FAF has an Earnings ESP of +2.78% and a Zacks Rank #3. The company will come up with first-quarter earnings results on Apr 21, 2016.

Everest Re Group Ltd RE has an Earnings ESP of +0.36% and a Zacks Rank #3. The company is slated to report first-quarter earnings results on Apr 25, 2016.
 

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
TRAVELERS COS (TRV): Free Stock Analysis Report
 
EVEREST RE LTD (RE): Free Stock Analysis Report
 
FIRST AMER FINL (FAF): Free Stock Analysis Report
 
ASPEN INS HLDGS (AHL): Free Stock Analysis Report
 
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