The supplemental health and life insurer -
) is scheduled to release its second-quarter 2014 financial results
after the closing bell on Jul 29.
In the last reported quarter, the company had delivered a 6.3%
positive earnings surprise, while the four-quarter trailing average
beat is pegged at 4.5%. Let us see how things are shaping up for
Why a Likely Positive Surprise?
Our proven model shows that Aflac is likely to beat earnings as
it has the required combination of two key components.
: Aflac has a positive Zacks ESP. That is because Expected Surprise
, which represents the difference between the Most Accurate
estimate of $1.60 per share and the Zacks Consensus Estimate of
$1.59, is +0.63%.
: Aflac has a Zacks Rank #2 (Buy). Note that stocks with Zacks Rank
#1, 2 and 3 have significantly higher chances of beating earnings.
Conversely, Sell-rated stocks (#4 and 5) are never considered going
into the earnings announcement.
The combination of Aflac's Zacks Rank #2 and +0.63% ESP raise
chances of an earnings beat on Jul 29.
What is Driving the Better-than-Expected
Aflac benefits from healthy capital ratios, product expertise,
stable ratings and accelerated capital deployment. Meanwhile, some
recovery witnessed in the U.S. economy in the past couple of
quarters is likely to have continued into this quarter and
boostoperations as well.
Furthermore, a consistent decline in claims and operating
expenses, shift to newer products, favorable claim trends and
disciplined management of existing accounts are likely to be
accretive to Aflac's earnings.
Based on these factors, management also expects to repatriate
funds worth 127 billion yen from Japan to the U.S. in 2014, up from
prior estimate 100 billion yen, part of which will likely
facilitate share purchases.
However, Aflac is considerably exposed to a challenging
operating environment due to fluctuation in the yen/dollar exchange
rate and interest rate risk, primarily in Japan that accounts for
about three-fourth of the company revenues.Despite the re-pricing
initiatives, the company continues to project declining trends in
the WAYS sales in 2014 as well.
Meanwhile, persistently lower confidence from small businesses
and a few sales associates raise doubts regarding the sales
opportunities in the U.S. in 2014. Overall, these factors prompted
Aflac's management to project the earnings growth guidance in low
single digits in 2014.
Other Stocks to Consider
Here are some other companies you may want to consider as our
model shows they have the right combination of elements to post an
earnings beat this quarter:
Qiwi Plc (
) has Earnings ESP of 4.8% and a Zacks Rank #1 (Strong Buy).
Mercury General Corp. (
) hasEarnings ESP of +14.9% and a Zacks Rank #1.
Moody's Corp. (
) has Earnings ESP of +6.1% and a Zacks Rank #3 (Hold).
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
AFLAC INC (AFL): Free Stock Analysis Report
QIWI PLC-ADR (QIWI): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
MERCURY GENL CP (MCY): Free Stock Analysis
To read this article on Zacks.com click here.