Can Torchmark (TMK) Earnings Beat Despite Weak Agent Growth?

Torchmark Corp. TMK is scheduled to report its second-quarter 2014 results after market close on Jul 23.

In the last quarter, this insurer delivered a 1.0% positive earnings surprise. The average beat for the trailing four quarters is 1.6%.

Will Torchmark continue to deliver positive earnings surprise this quarter as well? Let's see what factors might have influenced the earnings report this time around.

Factors Likely to Influence Q2 Results

Torchmark's health results should get a lift from Family Heritage and higher Part D auto-enrollee. Health sales are, however, particularly susceptible to weak demand for Medicare Supplement policies, one of the company's key products. This product sees stiff competition from Medicare Advantage plans, which Torchmark does not sell.

Moreover, we expect life sales at Torchmark to be hurt by a meager growth in the agent count at both Liberty National as well as at American Income.  

A continued low interest rate environment will also restrict investment income.

However, the company's continuous deployment of cash flows for share buybacks will drive earning per share expansion.

Earnings Whispers?

Our proven model does not conclusively show that Torchmark is likely to beat the Zacks Consensus Estimate in the second quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: Torchmark's Most Accurate estimate is pegged at $1.03 per share, which is in line the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%.

Zacks Rank: Torchmark has a Zacks Rank #3 (Hold). Though Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company's ESP of 0.00% makes surprise prediction difficult.

Other Stocks to Consider

Here are some 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:  

Everest Re Group Ltd. RE, Earnings ESP of +6.0% and a Zacks Rank #2.

ACE Ltd. ACE, Earnings ESP of +0.89% and a Zacks Rank #3.

Allied World Assurance Company Holdings, AG AWH, Earnings ESP of +3.75% and a Zacks Rank #3.