Will Aflac (AFL) Miss Earnings Estimates this Season?
The supplemental health and life insurer – Aflac Inc. (AFL) is scheduled to release its third-quarter 2014 financial results after the closing bell on Oct 28.
In the last reported quarter, the company had delivered a 4.4% positive earnings surprise, while the four-quarter trailing average beat is pegged at 3.8%. Let us see how things are shaping up for this announcement.
Earnings Whispers
Our proven model shows that Aflac is unlikely to beat earnings as it lacks the required combination of two key components.
Zacks ESP: Aflac’s Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate Estimate, of $1.43 per share is at par with the Zacks Consensus Estimate.
Zacks Rank: Aflac has a Zacks Rank #4 (Sell). We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) from going into an earnings announcement.
Major Factors at Play
Aflac has been facing the brunt of a weakening yen/dollar exchange rate, stiff competition as well as challenging economic and regulatory environment in both Japan and the US. These factors have been affecting the premium income and bank channels sales, indicating tough phase for the coming quarters as well.
Additionally, inadequate investment returns and reinvestment yields due to low interest rates continues to weigh on the margins. Alongside, difficult comps as well as higher capital and operating expenses impelled management to tighten its earnings growth guidance to low-single digits in 2014. Even operating cash flow plunged 30% year over year in 2013 and 45% in first-half 2014, signaling a bumpy road to recovery.
Nevertheless, the company’s healthyrisk-based capital, ratings and product portfolio aid sustained buoyancy. Moreover, a major shift in dollar-dominated fixed income securities and strategic alliance with Japan Post are expected to drive growth. Aflac is projected to expand its network base from the current 3,000 postal outlets to 10,000 post offices beginning Oct 2014, eventually targeting 20,000 locations by first-quarter 2016. These factors along with economic stability, should help the stock to gather momentum and mitigate risks going forward.
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:
Heartland Payment Systems Inc. (HPY) has Earnings ESP of +1.7% and a Zacks Rank #1 (Strong Buy).
Loews Corp. (L) has Earnings ESP of +10.5% and a Zacks Rank #3 (Hold).
Intercontinental Exchange Inc. (ICE) has Earnings ESP of +1.5% and a Zacks Rank #3.
Read the Full Research Report on AFL
Read the Full Research Report on ICE
Read the Full Research Report on L
Read the Full Research Report on HPY
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