Genworth Financial (GNW) Q4 Earnings: What's In The Cards?

Genworth Financial Inc. (NYSE:GNW) is slated to report fourth-quarter 2017 results on Feb 6 after the market closes. Last quarter, the company missed the Zacks Consensus Estimate by 28.57%.

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

Genworth’s fourth-quarter results are likely to benefit from a better performance at its U.S. Mortgage Insurance. Improving U.S. housing market, strong loss mitigation programs, growing private mortgage insurance market, lower delinquency are anticipated to have driven performance at U.S. Mortgage Insurance segment. The Zacks Consensus Estimate for adjusted operating income is pegged at $57 million.

Genworth estimates 2017 Canada loss ratio between 20% and 30% compared with the range of 25-35%, guided earlier. For Australia, the loss ratio is projected between 40% and 50% in 2017 due to regional loss pressure and lower-than-expected earned premiums.

Investment results are expected to have gained from an improving rate environment. The Fed has hiked the interest rate in four of the last five quarters. The Zacks Consensus Estimate for the metric is pegged at $790 million.

However, performance in U.S. Life Insurance Division is likely to have remained soft in the to-be-reported quarter. The Zacks Consensus Estimate for adjusted operating income is pegged at $37 million.

With respect to its positive surprise trend, the company delivered an earnings beat in two of the last three quarters of 2017.

Genworth Financial Inc Price and EPS Surprise

What Our Quantitative Model Predicts

Our proven model does not conclusively show that Genworth is likely to beat estimates this 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.

Zacks ESP: Genworth Financial has an Earnings ESP of -7.69%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Genworth Financial carries a Zacks Rank #2, which increases the predictive power of ESP. However, a company needs to have a positive ESP to be confident about an earnings surprise. Hence, this combination leaves surprise prediction inconclusive.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

American Equity Investment Life Holding Company (NYSE:AEL) is set to report fourth-quarter earnings on Feb 7. The company has an Earnings ESP of +1.12% and a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Primerica, Inc. (NYSE:PRI) has an Earnings ESP of +0.58%. The Zacks #2 Ranked company is slated to release fourth-quarter earnings on Feb 7.

Torchmark Corporation (NYSE:TMK) has an Earnings ESP of +0.12% and a Zacks Rank of 2. The company is scheduled to announce fourth-quarter earnings on Feb 7.

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