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Genworth Financial (GNW) Q3 Earnings: What's in the Cards?

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Genworth Financial (GNW) Q3 Earnings: What's in the Cards?

Strong performing U.S. Mortgage and Life Insurance businesses as well as better investment results might aid Genworth Financial's (GNW) Q3 results.

Genworth Financial, Inc. GNW is slated to report third-quarter 2018 results on Oct 30, after the market closes. Last reported quarter, the company surpassed the Zacks Consensus Estimate by 48.15%.

Let’s see how things are shaping up for this announcement.

Genworth Financial is expected to have witnessed a better-than-expected performance at its U.S. Mortgage Insurance segment, mainly driven by robust insurance in force growth, favorable loss performance, growing private mortgage insurance market and lower delinquency. Also, a lower tax incidence is likely to have contributed to this probable upside.

Genworth Financial’s U.S. Life Insurance segment is anticipated to have experienced a solid performance on the back of favorable mortality that has likely benefited both the long-term care insurance and annuity businesses.

The life insurer might have experienced higher premiums in the soon-to-be-reported quarter owing to a strong insurance in force and rate increases. Moreover, a gradual rise in interest results is predicted to have led to better investment results in the third quarter.

Riding on the strength of higher premiums as well as investment income, the insurer could have experienced a top-line improvement in the yet-to-be-reported quarter. The Zacks Consensus Estimate for revenues in the quarter to be reported is pegged at $2.1 billion, up 0.7% year over year.

Further, the company is projected to report bottom-line growth in the yet-to-be-reported quarter owing to a strong performing U.S. Mortgage as well as U.S. Life Insurance businesses. Additionally, a lower tax rate has possibly contributed to this estimated upside. The Zacks Consensus Estimate for third-quarter earnings stands at 23 cents, up 53.3% year over year.

However, the company’s term life business has likely faced pressure from bigger lapses due to the 15-year and 20-year term life insurance blocks. This might induce accelerated write-offs of deferred acquisition costs.

Nonetheless, with respect to its positive surprise trend, the company delivered an earnings beat in three of the last four quarters with an average of 63.32%.

What the Quantitative Model Predicts

Our proven model does not conclusively show that Genworth Financial is likely to beat estimates this yet-to-be-reported quarter. This is because a stock needs to have the right combination of the two main ingredients — a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for an earnings beat. But that is not the case here as elaborated below.

Earnings ESP: Genworth Financial has an Earnings ESP of 0.00%. This is because both he Zacks Consensus Estimate and the Most Accurate Estimate are pegged at 23 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Genworth Financial, Inc. Price and EPS Surprise


Genworth Financial, Inc. Price and EPS Surprise | Genworth Financial, Inc. Quote

Zacks Rank: Genworth Financial carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s 0.00% ESP makes surprise prediction difficult.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the right combination of elements to exceed estimates this time around are as follows:

Intercontinental Exchange Inc. ICE is set to report third-quarter earnings on Oct 31 and has an Earnings ESP of +0.10%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Willis Towers Watson Public Limited Company WLTW has an Earnings ESP of +3.91% and a Zacks Rank of 3. The company is set to release third-quarter earnings on Nov 2.

Prudential Financial, Inc. PRU has an Earnings ESP of +0.13% and a Zacks Rank #2. The company is set to announce third-quarter earnings on Nov 7.

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