The Travelers Companies, Inc.
) to beat expectations when it reports fourth-quarter and full
year 2012 results on Jan 22.
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Why a Likely Positive Surprise?
Our proven model shows that the property & casualty insurer
is likely to beat earnings because it has the two key
Positive Zacks ESP
: Earnings ESP (Read:
Zacks Earnings ESP: A Better Method)
is at a whopping 550%. This is very meaningful and a leading
indicator of a likely positive earnings surprise for shares.
Zacks #2 Rank (Buy)
: Note that stocks with Zacks Rank of #1, #2 and #3 have a
significantly higher chance of beating earnings. The sell rated
stocks (#4 and #5) should never be considered going into an
The combination of Travelers' Zacks Rank # 2 (Buy) and 550% ESP
makes us expect a positive earnings beat on Jan 22nd.
What is Driving the Better Than Expected
Travelers increased its stake in J. Malucelli Participações em
Seguros e Resseguros S.A., a market leader in the surety
insurance business in Brazil, to 49.5% from 43.4%.
It also made some useful investments to augment its technology
platform. Further, the company announced its intentions to resume
share repurchase activity. Additionally, it scores strongly with
the rating agencies.
Together, all these factors are expected to lead to a positive
earnings surprise in the upcoming quarter.
The positive trend is seen in the trailing four-quarter average
surprise of 11.9%, which was greatly aided by the nearly 13%
surprise in the last-reported quarter. Lower catastrophe losses
and sturdy underwriting results fueled the outperformance.
However, after tax and after estimated recoveries from
reinsurance loss of $650 million, stemming from Hurricane Sandy,
might weigh on the results.
Other Stocks to Consider
Travelers is not the only firm looking up this earnings season.
We also see likely earnings beats coming from these 3 industry
AmTrust Financial Services, Inc.
), Earnings ESP of +13.1% and Zacks Rank #2 (Buy).
Berkshire Hathaway Inc.
), Earnings ESP of +1.49% and Zacks Rank # 2 (Buy).
W.R. Berkley Corporation
), Earnings ESP of +6.25% and Zacks Rank #3 (Hold).