Will Q3 Earnings Hold A Surprise For Assurant (AIZ) Stock?

We expect multi line insurer Assurant, Inc. (NYSE:AIZ) to beat expectations when it reports third-quarter results on Oct 25, after the market closes.

Why a Likely Positive Surprise?

Our proven model shows that Assurant has the right combination of two key ingredients to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +4.23%. This is because the Most Accurate estimate of $1.48 is pegged higher than the Zacks Consensus Estimate of $1.42. The positive ESP is a meaningful and leading indicator of a likely earnings beat.

Zacks Rank: Assurant carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1 (Strong Buy), 2 (Buy) or 3 have a significantly higher chance of beating on earnings. The combination of Assurant’s Zacks Rank #3 and +4.23% Earnings ESP makes us reasonably confident of an earnings beat.

Conversely, the Sell-rated stocks (Zacks Rank #4 and 5) should never be considered going into an earnings announcement.

What is Driving the Better-Than-Expected Earnings?

Assurant is likely to report net operating income growth at Solutions in the to-be-reported quarter. Expense-saving initiatives and improved international profitability primarily contributed to the growth.

Moreover, the multi line insurer has likely witnessed a rise in total revenue at Solutions in the third quarter. We expect increased covered mobile devices and growth in vehicle service contracts to have driven the upside.

In addition, the company has likely experienced growth in the fee-based capital-light businesses, which constitute 27% of segmental revenues.

Also, continued share buyback should have aided the bottom line.

However, Assurant might have witnessed a decline in Specialty Property’s net earned premiums as well as net operating income, mainly due to the ongoing normalization of lender-placed insurance business. Increased efficiencies and expense-saving initiatives have partially offset this decline.

With respect to earnings trend, the company delivered positive surprises in three of the last four quarters.

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:

CNA Financial Corporation (NYSE:CNA) , which is slated to report third-quarter earnings on Oct 31, has an Earnings ESP of +2.38% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

RenaissanceRe Holdings Ltd. (NYSE:RNR) has an Earnings ESP of +3.59% and a Zacks Rank #3. The company is set to report third-quarter earnings on Nov 1.

MetLife, Inc. (NYSE:MET) has an Earnings ESP of +1.65% and a Zacks Rank #3. The company is set to report third-quarter earnings on Nov 2.

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