Will Travelers (TRV) Disappoint This Earnings Season? - Analyst Blog

The Travelers Companies, Inc. TRV is set to report its first-quarter 2014 results on April 22. Last quarter, the company posted a 23.5% positive earnings surprise. Let's see how things are shaping up for this announcement.

Growth Factors this Past Quarter

Travelers' results are expected to be largely aided by a benign catastrophe environment, favoring a solid underwriting performance.  Favorable rate environment is also expected to drive the upside.

Moreover, its new low-cost, lower-priced Auto insurance product – Quantum 2.0 is expected to improve volumes at attractive returns going ahead.

Travelers also remains focused on its efforts to reduce operating expenses and acquisition costs, in order to improve underwriting margins and introduce more competitively priced products.  

The company's share repurchases, aimed at lowering the share count, should also boost the bottom line.

However, a soft interest rate environment continues to be a drag on the investment results.

Earnings Whispers?

Our proven model does not conclusively show that Travelers is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  Travelers has a negative Zacks ESP. That is because the Most Accurate estimate stands at $2.10 while the Zacks Consensus Estimate is higher at $2.13. That leads to a difference of -1.41%.

Zacks Rank: Travelers' Zacks Rank #3 (Hold) when combined with a negative ESP makes surprise prediction difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Everest Re Group Ltd. RE, earnings ESP of +9.78% and a Zacks Rank #2 (Buy).

RenaissanceRe Holdings Ltd. RNR, earnings ESP of +9.52% and a Zacks Rank #1 (Strong Buy).

ACE Limited ACE earnings ESP of +1.41% and a Zacks Rank #2.