Will Torchmark (TMK) Q4 Earnings Benefit From Higher Premium?

Torchmark Corporation (NYSE:TMK) is slated to report fourth-quarter 2018 results on Feb 5, after market close. The company delivered positive surprise in each of the reported quarters of 2018.

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

Factors to Consider

Solid performances at American Income Agency, Global Life Direct Response and LNL Agency are likely to boost premiums at Life Insurance segment. The Zacks Consensus Estimate for Life premiums is pegged at $606 million, up 4.3%.

Higher number of agent count is likely to lead to an upside in net sales at American Income Agency, the largest contributor to life premium and net sales plus Torchmark’s most important distribution channel.

Focus on supplemental health insurance line of business is expected to benefit premium growth at its Health segment. The consensus mark is pegged at $257 million, up 4.5% year over year.

Improvement of Life and Health premiums is likely to add to total premiums the to-be reported quarter. The consensus estimate is pegged at $864 million, up 4.6% year over year.

Owing to decline in the negative impact of the lengthy delays in receiving Part D reimbursements, the company expects excess investment income to grow.

Higher pension costs due to the required implementation of a new mortality table and further investments in IT systems are expected to increase administrative expenses.

What Our Quantitative Model States

Our proven model does not conclusively show that Torchmark is likely to beat on earnings in the to-be-reported period. 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. But that is not the case here as you will see below.

Earnings ESP: Torchmark has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate as well as the Zacks Consensus Estimate is pegged $1.56. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Torchmark Corporation Price and EPS Surprise

Zacks Rank: Torchmark carries a Zacks Rank #3. The combination of 0.00% Earnings ESP and Zacks Rank #3 leaves our surprise prediction inconclusive.

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

Stocks to Consider

Here are some stocks from the finance sector that have the perfect combination of elements to post an earnings beat this time around.

Apollo Investment Corporation (NASDAQ:AINV) is set to report fourth-quarter earnings on Feb 6 and has an Earnings ESP of +0.72%. The company has a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Willis Towers Watson Public Limited Company (NASDAQ:WLTW) has an Earnings ESP of +0.63% and is a Zacks #3 Ranked player. The company is slated to announce fourth-quarter earnings on Feb 7.

Radian Group Inc. (NYSE:RDN) has an Earnings ESP of +3.03% and a Zacks Rank of 1. The company is anticipated to release fourth-quarter earnings on Feb 8.

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