American International Group, Inc. AIG is set to report second-quarter 2015 results on Aug 3. In the last reported quarter, the company delivered a positive earnings surprise of 3.39%.
In fact, the life insurer delivered positive earnings surprises in the three of the last four quarters, with an average beat of 6.28%.
Let’s see how things are shaping up for this announcement.
Why a Likely Positive Surprise?
Our proven model shows that AIG is likely to beat earnings as it has the perfect combination of the two key components.
Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +3.28%. This is because the Most Accurate estimate stands at $1.26, whereas the Zacks Consensus Estimate is pegged lower at $1.22. This is a meaningful indicator of a likely positive earnings surprise for shares.
Zacks Rank: AIG carries a Zacks Rank #3 (Hold). Note that companies with a Zacks Rank #1, 2 or 3 have a significantly higher chance of beating on earnings.
The combination of AIG’s Zacks Rank #3 and +3.28% ESP makes us confident of an earnings beat this season.
Factors Driving Better-Than-Expected Earnings
AIG’s results will reflect the benefits from its leading position in the insurance space, given its diversified and unique franchise in both domestic and international markets. The company has been consistently adopting the inorganic route to expand its business and global footprint. The acquisitions of NSM Insurance Group, Laya Healthcare and Ageas Protect Limited reflect its endeavors in this respect. These buyouts expanded AIG’s product portfolio, thereby enabling it to reach out to more customers and hence boost the second-quarter top line.
Additionally, AIG has been strategically divesting assets, which has helped in strengthening its focus on core operations that include property and casualty, life and retirement insurance business lines. Toward this end, the company vended its 46% stake in the airplane lessor – AerCap Holdings NV. These efforts to strategically boost its portfolio are likely to drive the company’s bottom line.
Positive pricing trends, net flows, active spread management and continuously improving momentum from the run-off of businesses with higher-crediting rates at life and retirement units will also boost earnings.
Other Stocks That Warrant a Look
Here are some other financial companies which you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
AerCap Holdings N.V. AER has an earnings ESP of +2.26% and a Zacks Rank #2.
American Financial Group Inc. AFG has an earnings ESP of +6.61% and a Zacks Rank #3.
American Capital, Ltd. ACAS has an earnings ESP of +17.39% and a Zacks Rank #2.
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