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Travelers (TRV) to Report Q1 Earnings: Is a Beat in Store?

Tanuka De

The Travelers Companies, Inc. TRV is slated to report first-quarter 2019 results on Apr 18, before market open. The company delivered positive earnings surprise in each of the last four reported quarters.

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

Travelers is likely to report premium growth, driven by an improved pricing environment, high levels of retention, a positive renewal premium change as well as substantial growth across its businesses. The Zacks Consensus Estimate for premiums is pegged at $6.8 billion, up 3.6% from first quarter 2018.

Successful execution of marketplace strategies and strategic investments are likely to boost commercial businesses. Continued growth at the profitable agency auto and homeowners business is likely to aid personal lines of business.

The company’s net investment income is likely to rise on an improved rate environment. Higher private equity returns as well as average level of fixed maturity investments are likely to drive investment income. Travelers expects $20-$25 million of higher after-tax net investment income on a quarterly basis in 2019. The Zacks Consensus Estimate for the metric is pegged at $615 million, representing 1.5% increase on a year-over-year basis.

Improved premiums and investment income are expected to boost the top line in the first quarter of 2019. The Zacks Consensus Estimate for revenues is currently pegged at $7.6 billion, reflecting a year-over-year rise of 4.7%.

Productivity and efficiency gains coupled with improved operating leverage should continue to help the company lower its expense ratio. The Zacks Consensus Estimate for underwriting expense ratio stands at 30.23, indicating an improvement of 37 basis points year over year.

What Our Quantitative Model States

Our proven model shows that Travelers is likely to beat on earnings in the to-be-reported quarter. This is because the stock has the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Earnings ESP: Travelers has an Earnings ESP of +2.09%. This is because the Most Accurate Estimate is pegged at $2.81, higher than the Zacks Consensus Estimate of $2.76. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. Price and EPS Surprise | The Travelers Companies, Inc. Quote

Zacks Rank: Travelers carries a Zacks Rank #3, which increases 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.

Stocks to Consider

Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:

The Progressive Corp. PGR is set to report first-quarter earnings on Apr 16 and has an Earnings ESP of +2.26%. The company has a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

W.R. Berkley Corp. WRB has an Earnings ESP of +2.41% and a Zacks Rank of 3. The company is set to release first-quarter earnings on Apr 23.

Cincinnati Financial Corp. CINF has an Earnings ESP of +4.26% and a Zacks Rank #4. The company is slated to announce first-quarter earnings on Apr 24.

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