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CNA Financial (CNA) Q1 Earnings May Beat: Stock to Gain?

We expect multiline insurer CNA Financial Corporation CNA to beat expectations when it reports first-quarter results on Apr 28 before market opens.

Why a Likely Positive Surprise?

Our proven model shows that CNA Financial has the right combination of two key ingredients to beat on earnings.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +13.33%. This is because the Most Accurate estimate of 68 cents is pegged higher than the Zacks Consensus Estimate of 60 cents. A positive ESP is a meaningful indicator of a likely positive earnings surprise for the company.

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

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement.  

What's Driving the Better-Than-Expected Earnings?

The commercial segment is likely to have delivered an improved performance with a better underlying loss ratio. Underwriting actions taken should improve retentions.

Overall premiums are expected to have improved. Prudent management of the long-term care book of business is likely to pay off.

However, a still soft interest rate environment may weigh on the company’s performance. Also accounting changes made will likely result in lower investment income.

With respect to the surprise trend, CNA Financial surpassed expectations in two of the last four quarters. Nonetheless, the company delivered an average negative surprise of 35.55%.

CNA Financial’s share price has been fluctuating 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 you may want to consider as these also have the right combination of elements to post an earnings beat this quarter:

American Financial Group Inc. AFG with an Earnings ESP of +0.60% and a Zacks Rank #2 (Buy). The company will release fourth-quarter earnings results on May 2.

Prudential Financial, Inc. PRU with an Earnings ESP of +0.42% and a Zacks Rank #3. The company will release fourth-quarter earnings results on May 4.

Cigna Corp. CI with an Earnings ESP of +0.46% and a Zacks Rank #3. The company will release fourth-quarter earnings results on May 6.
 

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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
 
CIGNA CORP (CI): Free Stock Analysis Report
 
PRUDENTIAL FINL (PRU): Free Stock Analysis Report
 
CNA FINL CORP (CNA): Free Stock Analysis Report
 
AMER FINL GROUP (AFG): Free Stock Analysis Report
 
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