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Will Aflac (AFL) Maintain Its Earnings Beat Streak in Q2?

·3 min read

Aflac Incorporated AFL is scheduled to release second-quarter 2021 results on Jul 28, after the market closes.

Q2 Estimates

The Zacks Consensus Estimate for the company’s second-quarter earnings per share is pegged at $1.27, indicating a fall of 0.78% from the prior-year quarter’s reported figure. The consensus mark for revenues stands at $5.32 billion, which suggests a decline of 1.6% from the year-ago quarter’s reported number.

Factors to Impact Q2 Results

Pandemic conditions are expected to have affected the company’s sales in both the segments of Japan (contributed to 70% of total revenues) as well as the United States (30%) as face-to-face sales are expected to have been persistently low because of COVID-19 restrictions. Aflac is trying to revive sales through virtual channels but interpersonal interactions between agents and customers work most effectively when selling life and health insurance policies.

At Aflac’s Japan’s segment, its top distribution agent Japan Post announced that cancer policies sales will be restored in April. Japan Post was prohibited from making sales from cancer insurance policies in mid 2019 after it was found guilty of sales malpractices and put under investigation. This resumption of sales now paves the way for gradual improvement in Aflac Cancer Insurance sales during the second half of the year.

The company was hopeful of sales recovery in the second half of the year with pandemic conditions getting better but the Delta variant may delay that possibility.

While the top line is expected to have remained under pressure, expenses are likely to have been high, weighing down the margins. Constant digital investments in its core technological platforms and their upgrades might have flared up costs. However, the company is trying to control costs wherever possible and to this end, it took numerous cost-curbing measures, which might have partially offset the stress on margins.

Earnings Surprise History

The company boasts an impressive earnings surprise history as its bottom line beat estimates in each of the trailing four quarters, the average being 19.69%. This is depicted in the chart below:

Aflac Incorporated Price and EPS Surprise

Aflac Incorporated Price and EPS Surprise
Aflac Incorporated Price and EPS Surprise

Aflac Incorporated price-eps-surprise | Aflac Incorporated Quote

What Our Quantitative Model Predicts

The proven Zacks model predicts an earnings beat for Aflac this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat, which is the case here.

Earnings ESP: Aflac has an Earnings ESP of +2.20%. This is because the Most Accurate Estimate of $1.30 is pegged higher than the Zacks Consensus Estimate of $1.27. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aflac has a Zacks Rank #3, currently.

Stocks to Consider

Here are some stocks worth considering from the insurance space with the perfect mix of elements to surpass estimates in their upcoming releases.

W.R.Berkley Corp. WRB has an Earnings ESP of +2.34% and a Zacks Rank of 3 at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chubb Limited CB has an Earnings ESP of +3.89% and a Zacks Rank #2, presently.

Cincinnati Financial Corporation CINF has an Earnings ESP of +10.98% and a Zacks Rank of 1 at present.

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Chubb Limited (CB) : Free Stock Analysis Report

W.R. Berkley Corporation (WRB) : Free Stock Analysis Report

Aflac Incorporated (AFL) : Free Stock Analysis Report

Cincinnati Financial Corporation (CINF) : Free Stock Analysis Report

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