Assurant (AIZ) Q2 Earnings Beat Unlikely: Stock At Risk?

Assurant, Inc. (NYSE:AIZ) is set to report second-quarter 2016 results on Jul 26, after the market closes. Last quarter, the company posted a negative earnings surprise of 16.92%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Past Quarter

The purchase of renewal rights on 0.3 million flood policies from Nationwide, in the second quarter of 2016, positions the insurer as the second largest administrator of the National Flood Insurance Program in the U.S. Given this competitive edge, the company has likely enjoyed higher premiums in the to-be-reported quarter.

Further, the Assurant Solutions segment is likely to benefit from new mobile programs, better international business performance and costs management initiatives.

An improving housing market must have given a boost to Mortgage solutions business.

Net operating income as well as net earned premiums at the Assurant Specialty Property segment is likely to decline due to the ongoing normalization of the lender-placed insurance business. Nonetheless, improved efficiencies and effective cost management might have limited the downside.

While catastrophe events across the globe will weigh on underwriting results, affecting underwriting income and combined ratio, sustained buybacks should boost the bottom line.

Adverse foreign exchange is likely to restrict the desired upside.

With respect to the surprise trend, Assurant delivered positive surprises in three out of the last four quarters, with an average beat of 5.47%. The stock price has been declining over the last few days. We wait to see how the stock fares post earning release.

Earnings Whispers

Our proven model does not conclusively show that Assurant is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Assurant has an Earnings ESP of +0.71%. This is because the Most Accurate estimate is $1.42, while the Zacks Consensus Estimate stands at $1.41.

Zacks Rank: Assurant carries a Zacks Rank #4 (Sell). We note that Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

The Allstate Corp. (NYSE:ALL) has an Earnings ESP of +1.89% and a Zacks Rank #3. The company is slated to report second-quarter earnings results on Aug 3.

Cigna Corp. (NYSE:CI) has an Earnings ESP of +1.67% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 4.

Manulife Financial, Inc. (NYSE:MFC) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is likely to report second-quarter earnings results on Aug 4.