ACE Limited (ACE) is set to report fourth-quarter 2013 results on Jan 28. Last quarter, the company posted a +12.7% earnings surprise. Let’s see how things are shaping up for this announcement.
Growth Factors This Past Quarter
ACE Limited has always considered acquisition as an efficient strategy to boost inorganic growth and expand its global footprint.
The company and its local partners recently inked a deal to acquire a 60.9% stake in The Siam Commercial Samaggi Insurance PCL, a general insurance company in Thailand, from Siam Commercial Bank to consolidate its foothold in Thailand, the second-largest economy in Southeast Asia. The company is expecting to strengthen its grip on commercial, auto and personal accident insurance sectors, capitalizing on The Siam Commercial Samaggi Insurance’s strong presence across Thailand.
ACE announced the launch of ACE Global Export Protection in Continental Europe, including Central and Eastern Europe, in a bid to further widen its product portfolio. ACE also expanded its offering to the offshore oil and gas sector by launching new insurance solution for suppliers and contractors.
Also, a benign cat environment is expected to aid underwriting results.
With respect to returning value to shareholders, the board approved a 24% increase in quarterly dividend. Moreover, the board of ACE Limited has approved a buyback program, authorizing the company to repurchase $2 billion worth of shares through Dec 31, 2014. ACE Limited eyes repurchase of $1.5 billion worth of shares by 2014-end.
However, a low interest rate environment remains a concern, weighing on net investment results.
Our proven model does not conclusively show that ACE Limited 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.
Zero Zacks ESP: That is because the Most Accurate estimate as well as the Zacks Consensus Estimate stands at $2.00. That leads to an ESP of 0.00%.
Zacks Rank #2 (Buy): ACE Limited’s Zacks Rank #2 increases the predictive power of ESP, but when combined with a zero ESP it 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 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:
Aspen Insurance Holdings Ltd. (AHL), earnings ESP of +3.57% and a Zacks Rank #1 (Strong Buy).
The Chubb Corp. (CB), earnings ESP of +0.49% and a Zacks Rank #1.
Platinum Underwriters Holdings Ltd. (PTP), earnings ESP of +10.67% and a Zacks Rank #1.