Genworth Financial, Inc. GNW is slated to report fourth-quarter 2018 results on Feb 5, after market close. The company surpassed expectations in each of the three reported quarters of 2018.
Factors to Consider
Solid insurance in force growth, favorable loss performance, growing private mortgage insurance market and lower delinquency should benefit Genworth Financial’s U.S. Mortgage Insurance segment. Loss ratio is also expected to have improved.
Solid insurance in force and rate increases benefited fourth-quarter’s premium. Investment income is expected to increase on an accelerated pace in rate hikes. Consequently, revenues are expected to improve in the quarter. The Zacks Consensus Estimate for revenues is pegged at $2.1 billion, up 28.8% year over year.
However, the company’s term life business continues to face pressure from higher lapses, stemming from the 15-year and 20-year term life insurance blocks. This is likely to weigh on premiums and lower after-tax results by nearly $5 million.
The Zacks Consensus Estimate for earnings is pegged at 24 cents, down 63.1% year over year.
What the Quantitative Model Predicts
Our proven model does not conclusively show that Genworth Financial is likely to beat estimates in the soon-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 24 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Price and EPS Surprise
Price and EPS Surprise | Quote
Zacks Rank: Genworth Financial carries a Zacks Rank #2, 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
Here are some stocks from the finance sector that have the perfect combination of elements to post an earnings beat this time around.
Apollo Investment Corp. AINV is set to report fourth-quarter earnings on Feb 6 and has an Earnings ESP of +0.72%. The company has a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Willis Towers Watson Public Limited Co. WLTW has an Earnings ESP of +0.63% and is a Zacks #3 Ranked player. The company is slated to announce fourth-quarter earnings on Feb 7.
Radian Group Inc. RDN has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is anticipated to release fourth-quarter earnings on Feb 8.
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