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Unum Group (UNM) Q4 Earnings: What's in Store for the Stock?

Zacks Equity Research

Unum Group UNM will report fourth-quarter 2018 results on Feb 5 after market closes. In the last reported quarter, the company delivered a positive earnings surprise of 7.03%.

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

Unum Group is likely to report premium growth across its core business segments in the soon-to-be-reported quarter. This probable improvement can be attributed to a strong persistency in Unum US business line and better-than-expected sales volume in Colonial Life along with prudent management of rate increases in relation to in-force business in Unum UK.

A compelling product portfolio, higher-than-expected premiums, favorable persistency and stable benefit ratio trends across the company’s major business lines might have contributed to a solid performance at Unum U.S. in the fourth quarter.

Additionally, Colonial Life is likely to have displayed a sturdy performance in the soon-to-be-reported quarter owing to better-than-expected premium growth and a possible increase in operating income.

Further, the company has possibly witnessed an increase in sales volume, driven by the introduction of the dental product in early 2018.

The company’s core businesses might have experienced more than decent sales volume and premium growth while maintaining strong margins in the fourth quarter.

The company is estimated to witness bottom-line growth in the yet-to-be-reported quarter, driven by continued favorable operating trends, a strong premium rise across the core business lines plus share buybacks. Lower tax rate has also contributed to this probable upside. The Zacks Consensus Estimate for four-quarter earnings is pegged at $1.31, up 15.9% year over year. For 2018, the company estimates operating earnings to grow in the range of 17-23%.

On the back of improving interest rates and expected higher new money yields, the company is likely to have witnessed better investment results in the soon-to-be-reported quarter.

However, the company could have seen soft sales volume at Unum US in the yet-to-be-reported quarter due to lower-than-expected sales in the group disability and life lines.

However, volatility in Unum U.K. might have persisted due to the challenging and uncertain environment, which has possibly induced lower operating income. Also, the company is anticipated to have witnessed a weak performance at its Closed Block and Corporate segments with sluggish operating revenues.

What Our Quantitative Model States

Our proven model does not conclusively show that Unum Group 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: Unum Group has an Earnings ESP of -0.63%. This is because the Most Accurate Estimate is pegged at $1.30, lower than the Zacks Consensus Estimate of $1.31. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter. 

Unum Group Price and EPS Surprise


Unum Group Price and EPS Surprise | Unum Group Quote

Zacks Rank: Unum Group carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company also needs to have a positive ESP to be confident about a likely earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.

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 perfect mix of elements to surpass estimates this time around are as follows:

Apollo Investment Corporation 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 Company 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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