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Will Q1 Earnings Hold a Surprise for Chubb (CB) Stock?

Chubb Limited CB is set to report first-quarter 2016 results on May 4, after the market closes. Last quarter, the company posted a positive earnings surprise of 4.39%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Chubb is likely to have witnessed top-line improvement on the back of its strong organic and inorganic growth profiles. Also, strategic acquisitions during the quarter are expected to have generated improved premium writings.

Further, the company is likely to have achieved higher return on equity due to its robust inorganic growth profile.

However, the company has possibly experienced a low interest rate environment, which in turn, might weigh on its investment results. Management expects first-quarter investment income to be lower from the $810–$825 million range due to timing of the closure of the merger.

Moreover, exposure to catastrophic losses might have a negative impact on the company’s underwriting results. This is likely to widen the company’s losses which will keep the combined ratio under pressure.

With respect to the surprise trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 2.41%.

Earnings Whispers

Our proven model does not conclusively show that Chubb is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Chubb has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.20.

Zacks Rank: Chubb holds a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

Gramercy Property Trust Inc. FIS has an Earnings ESP of +5.88% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 4.

Federal Realty Investment Trust FRT has an Earnings ESP of +1.46% and a Zacks Rank #3. The company is slated to report first-quarter earnings on May 4.

Fidus Investment Corporation FDUS has an Earnings ESP of +2.44% and a Zacks Rank #1. The company is set to report first-quarter earnings on May 5.

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CHUBB LTD (CB): Free Stock Analysis Report
 
FED RLTY INV (FRT): Free Stock Analysis Report
 
FIDELITY NAT IN (FIS): Free Stock Analysis Report
 
FIDUS INVESTMNT (FDUS): Free Stock Analysis Report
 
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