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Travelers (TRV) to Report Q3 Earnings: What's in the Cards?

Zacks Equity Research

Travelers TRV is set to report third-quarter 2019 earnings on Oct 22 after market close. The company delivered negative surprise of 11.01% in the last reported quarter.

Let’s see what’s in store for the company in the soon-to-be reported quarter.

Travelers is likely to have benefited from higher premiums and improved performances of personal lines of business.

High retention level and positive renewal premium change across all business lines are likely to have fueled premium increase in the to-be-reported quarter.  The Zacks Consensus Estimate for premiums is pegged at $7.1 billion, indicating an increase of 0.8% from third-quarter 2018.

Improved performance in both auto and home is likely to have aided personal lines of business.
Investment income is likely to have improved owing to higher returns from fixed maturity investments as well as non-fixed income portfolio. Travelers estimates net investment income to increase by $10 million to $15 million per quarter. The Zacks Consensus Estimate for the metric is pegged at $635 million, indicating 31.7% increase from the year-ago period reported figure.

Higher premiums and investment income are likely to have aided the top line in the to-be-reported quarter. The Zacks Consensus Estimate for revenues is currently pegged at $7.9 billion, indicating 2.2% increase from the year-ago period reported figure.

Improving productivity, efficiency gains and better operating leverage are likely to have helped the company lower its expense ratio. The Zacks Consensus Estimate for underwriting expense ratio stands at 30.28, indicating deterioration of 58 basis points year over year.

Given a not-so-active catastrophe environment, underwriting income and combined ratio are likely to have improved. Also, the company has a new catastrophe reinsurance treaty for 2019, which is expected to have aided underwriting profitability.

Interest expenses are likely to have increased given high debt level.

Continued share buybacks might have provided additional upside to the bottom line.

The Zacks Consensus Estimate for third -quarter earnings per share stands at $2.39, implying a decrease of 5.9% from the year-ago reported figure.

What Our Quantitative Model States

Our proven model does not conclusively predict an earnings beat for Travelers this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Travelers has an Earnings ESP of -2.67%. This is because the Most Accurate Estimate is pegged at $2.33, lower than the Zacks Consensus Estimate of $2.39. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. price-eps-surprise | The Travelers Companies, Inc. Quote

Zacks Rank: Travelers carries a Zacks Rank #3.

Stocks to Consider

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

The Allstate Corporation ALL is set to report third-quarter earnings on Oct 29. It has an Earnings ESP of +3.22% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

CNA Financial Corporation CNA has an Earnings ESP of +0.95% and is a Zacks #3 Ranked player. The company is slated to announce third-quarter earnings on Oct 28.

Radian Group RDN has an Earnings ESP of +1.89% and a Zacks Rank of 1. The company is set to release third-quarter earnings on Oct 30.

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