Assurant (AIZ) Q1 Earnings May Disappoint: Stock to Suffer?

Assurant, Inc. AIZ is set to report first-quarter 2016 results on Apr 26, after the market closes. Last quarter, the company posted a negative earnings surprise of 37.01%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Assurant Solutions, one of the main business segments of the company, is likely to have witnessed top-line growth in the quarter on the back of company’s mobile business. Moreover, the segment strengthened its foothold in existing markets such as Canada, Argentina and Brazil and also expanded to new markets such as Mexico, Germany and Spain in the quarter. This should have a favorable impact on its revenues in the to-be-reported quarter.

Further, the bottom line at Assurant Solutions is anticipated to benefit from the steps taken by management to reduce expenses in both domestic and international businesses. Mortgage solutions business is likely to have benefited from improving housing market.

However, the company’s Assurant Specialty Property segment is likely to have experienced a decline in its net operating income as well as net earned premiums due to the ongoing normalization of lender-placed insurance business, partially offset by increased efficiencies and expense-saving initiatives. Also, adverse foreign exchange is likely to have restricted the desired upside.

With respect to the surprise trend, Assurant delivered positive surprises in three of the last four quarters with an average beat of 1.64%.

Earnings Whispers

Our proven model does not conclusively show that Assurant is likely to beat on earnings this quarter. 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. That is not the case here as you will see below.

Zacks ESP: Assurant has an Earnings ESP of -7.69%. This is because the Most Accurate estimate is $1.20, while the Zacks Consensus Estimate stands at $1.30.

Zacks Rank: Assurant carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, a negative ESP makes surprise prediction difficult.

Currently, the stock is trading at $79.63. We expect the release to lead to stock movement.

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:

Radian Group, Inc. RDN has an Earnings ESP of +26.67% and a Zacks Rank #3. The company is slated to report first-quarter earnings on Apr 27.

Cigna Corp. CI has an Earnings ESP of +0.46% and a Zacks Rank #3. The company is set to report first-quarter earnings on May 6.

Prudential Financial, Inc. PRU has an Earnings ESP of +0.42% and a Zacks Rank #2. The company is likely to report first-quarter earnings on May 4.

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