Global multi-line insurer
American International Group Inc.
) is scheduled to release second-quarter 2014 financial results
after the closing bell on Aug 4.
In the last reported quarter, the company delivered a positive
earnings surprise of 12.1%. Notably, AIG has maintained its
earnings streak in the trailing four quarters with an average beat
of 16.7%. Let us see how things are shaping up for this
Factors to Consider
AIG's financials reflect the impact of several one-time items,
which fail to instill confidence regarding steady growth. The
divestment of ILFC in May has liberated the company of the related
liabilities as well as improved capital, while also supporting
higher share buybacks.
Moreover, the receipt of about $2 billion as settlements from
residential mortgage legal disputes with various banks, as
announced in July, including about $650 million from
Bank of America Corp.
) paves the way for incremental cash flow. Some of this is expected
to be recorded in the second quarter as well.
Earlier this month, AIG intended to redeem bonds worth over $2.0
billion that were due in 2016 and 2017, thereby improving leverage
to some extent. However, the scope of significant growth from these
developments is elusive, given the risks lingering on the core
Moreover, the lower premiums and the low interest rate
environment have been adversely affecting AIG's top line and
investment returns over the past several quarters. Additionally,
stiff global pricing competition and unfavorable reserves in the
property-casualty (P&C) unit weigh on underwriting results.
Hence, robust growth in the near term does not seem likely,
given the absence of any near-term fundamental growth catalyst,
which also casts a shadow on the outlook of AIG in the coming
Our proven model shows that AIG is unlikely to beat earnings as
it lacks the required combination of two key components.
: AIG has a negative Zacks ESP. That is because Expected Surprise
, which represents the difference between the Most Accurate
estimate of $1.04 per share and the Zacks Consensus Estimate of
$1.05, is -0.95%.
: AIG's Zacks Rank #3 (Hold) increases the predictive power of ESP.
However, we need to have a positive ESP to be confident of an
Sell-rated stocks (#4 and 5) are never considered going into the
earnings announcement, especially when the company is witnessing
negative estimate revisions momentum.
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:
National General Holdings Corp (
) has Earnings ESP of +8.00% and a Zacks Rank #1 (Strong Buy).
Qiwi Plc (
) has Earnings ESP of +4.76% and a Zacks Rank #2 (Buy).
Voya Financial Inc. (
) has Earnings ESP of +2.86% and a Zacks Rank #3 (Hold).
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