We expect property and casualty insurer The Chubb Corporation (CB) to beat expectations when it reports third-quarter 2014 results on Oct 23 after market close.
Why a Likely Positive Surprise?
Our proven model shows that Chubb is likely to beat earnings when it reports on Oct 23 because it has the right combination of two key ingredients.
Zacks ESP: Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.66%. This is a meaningful and leading indicator of a positive earnings surprise.
Zacks Rank: Chubb carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks 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 earnings announcement.
What is Driving the Better-than-Expected Earnings?
A low-growth competitive pricing environment plus the company’s focus on protecting its underwriting profitability and returning capital to shareholders would driver earnings in the to-be reported quarter.
Chubb writes premium through three segments – Commercial, Personal and Specialty Insurance. As far as premium growth is concerned, prices of both specialty and personal lines are expected to see growth as prices continue to exceed loss costs. However, commercial lines will see restricted top-line growth since the rate is about equal to loss cost trend.
Chubb’s earnings are also expected to benefit from its disciplined capital management strategy which includes share buyback and dividend payment. The positive trend is evident in the trailing four-quarter average earnings beat of 1.13%.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Arch Capital Group Ltd. (ACGL), Earnings ESP of +2.06% and a Zacks Rank #2.
Allied World Assurance Company Holdings, AG (AWH), Earnings ESP of +48.08% and a Zacks Rank #3 (Hold).
Everest Re Group Ltd. (RE), Earnings ESP of +8.48% and a Zacks Rank #3.
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