We expect life and supplemental health insurer, Torchmark Corp. (TMK) to beat expectations when it reports third-quarter 2014 results on Oct 22 after market close.
Why a Likely Positive Surprise?
Our proven model shows that Torchmark is likely to beat earnings when it reports on Oct 22 because it has the right combination of key factors.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.98%. This is a meaningful and leading indicator of a likely positive earnings surprise for this company.
Zacks Rank: Torchmark carries a Zacks Rank #3 (Hold). The stocks with Zacks Ranks #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 earnings announcement.
What is Driving Better-than-Expected Earnings?
We expect earnings to benefit from a likely increase in agent count at Liberty National, American Income and Family Heritage. We also expect higher sales in life insurance.
Top line at Torchmark is expected to benefit from higher health sales at Liberty National Life and United American agencies.
Moreover, the company’s continuous deployment of cash flows for share buybacks will drive earning per share expansion.
Nonetheless, results should be held back by an expected drop in Part D margins as well as weak premium growth due to the lag effect of poor sales in recent years.
In the last quarter, Torchmark delivered a 1.0% negative earnings surprise. However, the average beat for the trailing four quarters is 0.02%.
Other Stocks to Consider
Here are some other companies in the financial sector worth considering as our model shows these have the right combination of elements to post an earnings beat this quarter.
The Allstate Corp. (ALL) has an Earnings ESP of +4.41% and carries a Zacks Rank #2 (Buy).
Symetra Financial Corporation (SYA) has an Earnings ESP of +2.27% and carries a Zacks Rank #2.
Assurant Inc. (AIZ) has an Earnings ESP of +1.27% and carries a Zacks Rank #3.
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