Assurant, Inc. AIZ is slated to report fourth-quarter 2018 results on Feb 12, after the market closes. In the last reported quarter, the company delivered a positive surprise of 6%.
Let’s see, how things are shaping up for this announcement.
Assurant is likely to report bottom-line growth in the to-be-reported quarter, mainly driven by solid organic growth across Global Lifestyle, Housing and Preneed business lines. This probable upside can also be attributed to contributions from The Warranty Group (TWG) buyout along with lower tax incidence. Also, continued share buybacks are likely to boost this expected improvement.
Riding on the strength of rising interest rates, higher invested assets and business growth, the company is likely to witness better investment results in the soon-to-be reported quarter.
Therefore, owing to an anticipated rise in investment income and higher premiums earned, fees and other income, the company will possibly deliver robust revenues in the fourth quarter. To that end, the consensus mark for the metric is currently pegged at $2.3 billion, representing a 39.7% surge from the year-ago quarter’s tally.
The company is anticipated to display a strong performance at its Global Lifestyle business in the quarter to be reported. Better-than-expected organic growth and a substantial contribution from the TWG acquisition have mainly led to this probable uptick. Also, recently introduced mobile programs along with Global Automotive expansion and expense efficiencies are likely to contribute to this improvement.
Further, the top line at Global Lifestyle is likely to improve in the fourth quarter, fueled by expected growth at Connected Living and Global Automotive.
With respect to Global Housing, the company is estimated to witness better-than-expected results, primarily boosted by sustained revenue growth in multifamily housing, realignment of business and implementation of different expense management initiatives across this segment.
However, the company might have incurred higher expenses, mainly due to a possible increase in policyholder benefits, selling, underwriting, general and administrative expenses plus interest expense. This in turn, will perhaps weigh on the property and casualty (P&C) insurer’s operating margin expansion.
Being a P&C insurer, Assurant is prone to the after effects of catastrophe loss and we expect the fourth quarter to be no exception. Catastrophe losses stemming from Hurricane Michael are anticipated to range between $75 million and $105 million pretax. Such losses are likely to affect the company’s underwriting performance, thereby rendering volatility to its overall results. Nonetheless, the company’s consistent commitment to excellence in risk management is projected to mitigate a high level of catastrophe loss. In fact, the aforementioned loss estimate is below the company’s cat reinsurance prevent retention of $120 million.
In the fourth quarter, corporate loss is estimated to increase on a sequential basis due to consistent investments in artificial intelligence, the Connected Home and the Connected Car.
Despite a strong performance at the Preneed, the company is not too optimistic about this segment’s growth in the quarter to be reported due to seasonality and higher mortality.
What Our Quantitative Model States
Our proven model does not conclusively show that Assurant is likely to beat on earnings this to-be-reported period. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But that is not the case here as you will see below.
Earnings ESP: Assurant has an Earnings ESP of +31.87%. This is because the Most Accurate Estimate is pegged at 60 cents, higher than the Zacks Consensus Estimate of 46 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Assurant, Inc. Price and EPS Surprise
Assurant, Inc. Price and EPS Surprise | Assurant, Inc. Quote
Zacks Rank: Assurant carries a Zacks Rank #4 (Sell), which lowers the predictive power of ESP. We caution against Sell-rated stocks (4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Given the above combination, surprise prediction for the stock is thus left inconclusive.
Stocks to Consider
Some stocks worth considering from the finance sector with the perfect mix of elements to outshine estimates this time around are as follows:
Ares Capital Corporation ARCC is set to report fourth-quarter earnings on Feb 12. The company has an Earnings ESP of +1.10% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
AerCap Holdings N.V. AER has an Earnings ESP of +6.84% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings on Feb 14.
Agree Realty Corporation ADC has an Earnings ESP of +0.88% and a Zacks Rank of 3. The company is slated to announce fourth-quarter earnings on Feb 21.
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