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Travelers (TRV) Likely to Top Q3 Earnings: Stock to Gain?

Zacks

We expect property and casualty insurer The Travelers Companies, Inc. TRV to beat expectations when it reports third-quarter results on Oct 20 before the market opens.

Why a Likely Positive Surprise?

Our proven model shows that Travelers has the right combination of two key ingredients to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +5.17%. This is because the Most Accurate estimate of $2.44 is pegged higher than the Zacks Consensus Estimate of $2.32. The positive ESP is a meaningful and leading indicator of a likely earnings beat.

Zacks Rank: Travelers carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Travelers’ Zacks Rank #3 and +5.17% ESP makes us reasonably confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank stocks here.

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

Currently, the stock is trading at $115.08. We expect the release to lead to stock movement.

What is Driving the Better-Than-Expected Earnings

Travelers has likely witnessed a rise in new business written in the third quarter, primarily driven by Optima – its new strategic Personal Lines Auto product in Canada.

Further, the company is likely to report robust results at its Personal Insurance business, with strong retentions and business levels in both Agency Auto and Agency Homeowners.

Moreover, the company is likely to have experienced an increase in net written premiums due to accelerated growth in Agency Homeowners as well as in Agency Auto.

In addition, continued share buyback should have aided the bottom line.

However, the company is expected to report a decline in investment income, owing to low reinvestment rates and lesser returns in the non-fixed income portfolio.

With respect to earnings trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 8.51%.

TRAVELERS COS Price and EPS Surprise


TRAVELERS COS Price and EPS Surprise | TRAVELERS COS Quote

Stocks to Consider

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

Everest Re Group Ltd. RE has an Earnings ESP of +1.39% and a Zacks Rank #2. The company is set to report third-quarter earnings on Oct 24.

Chubb Limited CB has an Earnings ESP of +1.92% and a Zacks Rank #3. The company is set to report third-quarter earnings on Oct 25.

AXIS Capital Holdings Limited. AXS has an Earnings ESP of +12.37% and a Zacks Rank #3. The company is slated to report third-quarter earnings on Oct 26.

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