Can Chubb (CB) Keep the Earnings Streak Alive? - Analyst Blog

We expect property and casualty insurer The Chubb Corporation CB to beat expectations when it reports its first-quarter 2014 results on April 24.

 

Why a Likely Positive Surprise? 

 

Our proven model shows that Chubb is likely to beat earnings this quarter because it has the right combination of two key ingredients. 

 

Zacks ESP: Expected Surprise Prediction, or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.76%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

 

Zacks Rank: Chubb carries a Zacks Rank #3 (Hold). 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.  

 

The combination of Chubb's Zacks Rank #3 and +4.76% ESP makes us confident of a positive earnings beat on April 24. 

 

What is Driving the Better-than-Expected Earnings?

 

Improving industry fundamentals such as price strengthening in the Commercial lines as well as the Personal lines business will drive overall earnings growth. Chubb's International segment, which accounts for nearly one-fourth of the company's total premium, is witnessing premium increases for the past several quarters and is expected to contribute to earnings growth this quarter as well. Earnings for the first quarter will, however, suffer to some extent due to weather-related loss incurred in Jan 2014.

 

Further, Chubb's earnings are expected to benefit from its disciplined capital management strategy which includes share buyback and dividend payment. The positive trend is seen in the trailing four-quarter average surprise beat of 16.3%.

 

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:

 

Aspen Insurance Holdings Ltd. AHL, earnings ESP of +6.12% and a Zacks Rank #1 (Strong Buy). 

 

Montpelier Re Holdings Ltd. MRH, earnings ESP of +11.7% and a Zacks Rank #2 (Buy).

 

Platinum Underwriters Holdings Ltd. PTP, earnings ESP of +4.31% and a Zacks Rank #2 (Buy).