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Torchmark (TMK) Q4 Earnings: Stock to Pull a Surprise?

Torchmark CorporationTMK is scheduled to report fourth-quarter 2016 results after the closing bell on Feb 1. Last quarter, the company delivered a positive earnings surprise of 2.68%. Let's see how things are shaping up for this announcement.

Factors Influencing this Past Quarter

Torchmark's premiums are likely to have increased in the to-be-reported quarter due to impressive performance by the American Income Exclusive Agency. Higher agent count - estimated between 6,750 and 6,950 by 2016 - is expected to have resulted in an increase in life sales.

Continued share buyback is another positive and should support the bottom line.

Despite challenges at Liberty National, the company expects life net sales to grow between 10% and 11% in 2016, while health net sales growth is estimated between 7% and 9%.

For 2016, Torchmark expects net operating income between $4.43 per share and $4.49 per share. Health sales are expected grow 7-9% in 2016, while life sales growth is expected between 7% and 8%. Free cash flow is anticipated to be around $320 million.

Though Global Life is expected to have benefitted from low competition, Torchmark expects life sales growth to decline by 7-9% in 2016.

For 2016, Torchmark expects excess investment income to increase about 2%. At the midpoint of its 2016 guidance, the company expects a drag of approximately $9 million on excess investment income from Part D.

Also, increased administrative expenses are likely to have weighed on margins. Torchmark projects administrative expenses to increase by about 5% and account for about 6.2% of premiums in 2016.

With respect to the surprise trend, Torchmark surpassed expectations in three of the last four quarters with an average beat of 0.90%.

The company's share price has been fluctuating over the last few days. We wait to see how the stock performs after the quarterly result announcement.

Torchmark Corporation Price and EPS Surprise

Torchmark Corporation Price and EPS Surprise | Torchmark Corporation Quote

Earnings Whispers

Our proven model does not conclusively show that Torchmark will beat the Zacks Consensus Estimate in the fourth quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or at least 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP : Torchmark has 0.00% Earnings ESP. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.12 per share. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Torchmark has a Zacks Rank #2, which increases the predictive power of ESP. However, a 0.00% Earnings ESP makes surprise prediction difficult..

The Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some insurers you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

American International Group, Inc. AIG , which is set to report fourth-quarter earnings results on Feb 14, has an Earnings ESP of +1.64% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

Cigna Corp CI has an Earnings ESP of +2.30% and a Zacks Rank #3. The company is likely to report fourth-quarter earnings results on Feb 2.

Lincoln National Corporation LNC has an Earnings ESP of +0.59% and a Zacks Rank #2. The company is slated to report fourth-quarter earnings results on Feb 1.

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Lincoln National Corporation (LNC): Free Stock Analysis Report

Torchmark Corporation (TMK): Free Stock Analysis Report

American International Group, Inc. (AIG): Free Stock Analysis Report

Cigna Corporation (CI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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