Is A Beat In The Cards For Torchmark (TMK) In Q1 Earnings?

We expect Torchmark Corporation (NYSE:TMK) to surpass expectations in first-quarter 2018 results after the market closes on Apr 18.

Why a Likely Positive Surprise?

Our proven model clearly shows that Torchmark has the right combination of the following two key ingredients to beat estimates this quarter.

Zacks ESP: Torchmark has an Earnings ESP of +0.23%. The positive ESP indicates a likely earnings surprise. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Torchmark holds a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 along with a positive Earnings ESP have significantly higher chances of an earnings beat.

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.

Factors Driving the Better-Than-Expected Earnings

Torchmark has likely witnessed a noticeable improvement in premiums at its Life Insurance segment owing to a better-than-expected performance at American Income Exclusive Agency. The Zacks Consensus Estimate for premiums at the Life Insurance business for the soon-to-be-reported quarter is pegged at $606 million, representing a year-over-year increase of 5.2%.

Further, the life insurer is expected to have displayed premium growth at its Health segment with the consensus mark pegged at $252 million, reflecting a 2.9% rise year over year. As a result, Torchmark has likely experienced total premium growth, driven by a favorable performance at both its Life Insurance and Health segments. The Zacks Consensus Estimate for the same stands at $857 million, denoting an improvement of 4.4% on a year-over-year basis.

Moreover, higher number of agent count has likely driven an upside in net sales at American Income Exclusive Agency, the largest contributor to life premium and net sales plus Torchmark’s most important distribution channel.

On the back of an improving interest rate environment (currently in the range of 1.50-1.75%) and higher new money rates, the company is anticipated to have reported higher excess investment income in the yet-to-be-reported quarter. The Zacks Consensus Estimate for the metric is pegged at $219 million, translating into a 5.3% year-over-year gain.

Also, the company has likely delivered top-line growth in the soon-to-be-reported quarter, mainly fueled by the anticipated growth in premiums and investment results. The Zacks Consensus Estimate for the company’s revenues is pegged at $1.1 billion, representing an increase of 5.1% on a year-over-year basis.

Additionally, continued share buyback will likely boost the bottom line. The consensus mark for the company’s earnings per share in the period to be reported is pegged at $1.46, up 26.9% year over year.

However, higher administrative expenses are expected to weigh on insurance underwriting income in the quarter to be reported.

Other Stocks to Consider

Some other stocks worth considering from the insurance industry with the right combination of elements to also exceed estimates this time around are as follows:

Brown & Brown, Inc. (NYSE:BRO) is set to report first-quarter earnings on Apr 23. The stock has an Earnings ESP of +1.72% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Markel Corporation (NYSE:MKL) has an Earnings ESP of +3.71% and is a Zacks #3 Ranked player. The company is expected to announce first-quarter earnings on Apr 25.

Kemper Corporation (NYSE:KMPR) has an Earnings ESP of +23.79% and a Zacks Rank #2. The company is slated to release first-quarter earnings on Apr 30.

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