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Travelers (TRV) to Report Q2 Earnings: What's in Store?

Zacks Equity Research

The Travelers Companies, Inc. TRV is slated to report second-quarter 2019 results on Jul 23, before market open. The company delivered positive earnings surprise in three of the last four quarters.

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

Travelers’ second-quarter premium is likely to increase across its segments on better pricing, strong retention level and positive renewal premium change. The Zacks Consensus Estimate for premiums is pegged at $7.1 billion, indicating an upside of 4.8% from second-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.

Higher private equity returns and average level of fixed maturity investments are likely to boost investment income. The Zacks Consensus Estimate for the metric is pegged at $628 million, indicating 5.5% increase on a year-over-year basis.

Better premiums and investment income are likely to aid the top line in the to-be-reported quarter. The Zacks Consensus Estimate for revenues is currently pegged at $7.6 billion, indicating a year-over-year increase of 4.1%.

A not-so-active catastrophe environment along with reinsurance coverages is likely to add to underwriting profits in the second quarter.

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 30.33, indicating an improvement of 37 basis points year over year.

Continued share buyback should provide a boost to the bottom line. The Zacks Consensus estimate for earnings is pegged at $2.31, indicating 27.6% year-over-year increase.

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. Price and EPS Surprise

The Travelers Companies, Inc. price-eps-surprise | The Travelers Companies, Inc. Quote

What Our Quantitative Model States

Our proven model does not show that Travelers is likely to beat on earnings in the to-be-reported quarter. This is because the stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). This is not the case as you can see below

Earnings ESP: Travelers has an Earnings ESP of -1.19%. This is because the Most Accurate Estimate is pegged at $2.28, lower than the Zacks Consensus Estimate of $2.31. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Travelers currently carries a Zacks Rank #4 (Sell).

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

Stocks to Consider

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

Chubb Limited CB is set to report second-quarter earnings on Jul 23 and has an Earnings ESP of +1.52%. The company has a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +2.16% and a Zacks Rank of 1. The company is set to release second-quarter earnings on Jul 23.

W.R. Berkley Corporation WRB has an Earnings ESP of +13.27% and a Zacks Rank #3. The company is slated to announce second-quarter earnings on Jul 23.

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