Verisk (VRSK) To Report Q3 Earnings: What's In The Cards?

Business information services firm Verisk Analytics, Inc. (NASDAQ:VRSK) is scheduled to report third-quarter 2016 results after the markets closes on Nov 1. In the last reported quarter, adjusted earnings missed the Zacks Consensus Estimate by 3 cents. Over the trailing four quarters, Verisk managed to beat earnings estimates twice, delivering an average positive earnings surprise of 2.63%.

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

Key Factors in the Third Quarter

Verisk continues to deliver outstanding data analytics solutions to customers across its core verticals of insurance, natural resources, and financial services. The company’s ability to generate strong cash enables it to meet its deleveraging objectives and helps it invest on behalf of its shareholders. However, the company is focused on inorganic growth due to which it has to incur one-time expenses to ensure long-term gains.

During the quarter, Verisk Insurance Solutions collaborated with SAP SE (DE:SAPG) (SAP) to utilize its cloud-based solution Circular Authority for Insurance for tracking and analyzing Insurance Service Office Circulars. The addition of this software to Verisk’s product portfolio will add value and functionality for its customers. Such collaborations will help the company augment its product offering, hence enhancing its top-line.

In addition, Verisk Insurance Solutions also launched its new energy insurance unit. This unit will focus on providing analytical services to the oil and gas, petrochemicals, power generation, and metals and mining industries, which will help improve operational efficiencies, minimize costs, and expand profitably in challenging markets.

Also, Elizabeth Casas was appointed as Verisk Insurance Solutions’ managing director of energy and insurance. Casas has immense experience, having served companies in New York, Houston, London, Colombia, and Mexico. Prior to joining Verisk, she was the vice president and senior energy underwriter at Swiss Re Houston. Such appointments will help improve the company’s decision-making abilities and will help it gain contracts going forward.

The company also acquired data and subscriptions segment of Quest Offshore Resources, Inc.. The acquired segment is now part of Wood Mackenzie, Verisk’s Analytics business. The deal will expand Wood Mackenzie’s service offerings. The company will be able to offer better ways to analyze the offshore oil and gas sector. This acquisition will enhance the client’s investment decisions by helping them understand the availability, capability, and cost in key offshore equipment and service markets. Using Quest’s expertise in the data and subscription business, Verisk will be well positioned to enhance offerings to its clients. The company also acquired Greentech Media which joined Wood Mackenzie to enhance its research and other capabilities for subsectors, including solar generation, energy storage and smart grids that react dynamically to changes in supply and demand. These strategic acquisitions will likely help the company to attract favorable contracts during the quarter, augmenting its revenues.

Earnings Whispers

Our proven model does not conclusively show that Verisk is likely to beat earnings this quarter as it lacks key components. 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. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently at -2.67%.

Zacks Rank: Verisk carries a Zacks Rank #3, which when combined with a negative ESP makes surprise prediction difficult.

We caution against stocks with a Zacks Rank #4 or #5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Please check our Earnings ESP Filter that enables you find stocks that are expected to come out with earnings surprises.

Stocks to Consider

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

Monolithic Power Systems, Inc. (NASDAQ:MPWR) with an Earnings ESP of +2.63% and a Zacks Rank #3.

ONE Gas, Inc. (NYSE:OGS) with an Earnings ESP of +31.58% and a Zacks Rank #2.You can see the complete list of today’s Zacks #1 Rank stocks here.

Post Properties Inc. (NYSE:PPS) with an Earnings ESP of +1.24% and a Zacks Rank #2.

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