The market expects Hanover Insurance Group (THG) to report a year-on-year decline in earnings on top of premiums when it reports results for the quarter that ended June 2022. These common sentiments are important for evaluating the company’s image, but a powerful factor that can affect its market value. the closest the actual results are to these figures.
Stocks may move if these key numbers are expected in the upcoming earnings report, which is expected to be released on August 2. On the other hand, if they miss, the stock may drop.
Although the stability of the price changes itself and future earnings expectations will depend on the management’s discussion about the business performance, it is important to prevent the EPS surprise opportunity.
Zacks Consensus Estimate
The insurance company is expected to post earnings of $2.10 per share in its upcoming report, which represents a year-over-year change of -26.3%.
Revenue is expected to be $1.36 billion, up 7.8% from the previous quarter.
Estimate Revisions Trend
The EPS estimate for the quarter has also been revised by 7.51% over the past 30 days to date. This is an overview of how the researchers reviewed their original calculations during this period.
Investors should remember that a big change may not always reflect the way it is evaluated by analysts.
Estimates review the company’s earnings before they are released to provide business information during the period when the results are released. This information is at the core of our amazing forecasting model – the Zacks Company’s opinion ESP (Predicting Expected Surprises).
Zacks Earnings ESP compares the Average Estimate to the Zacks Consensus Estimate for the quarter; The Most Accurate Estimate is the latest version of the Zacks Consensus EPS estimate. The idea is that analysts who are reviewing their numbers before the money is released have more recent information, which may be more accurate than what they and other contributors to the consensus previously predicted.
Therefore, a positive or negative ESP calculation indicates a possible deviation of the actual earnings from the contract estimate. However, the predictive power of the model is important for good ESP readings only.
Positive earnings ESP predicts strong earnings, especially when combined with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold). Our research shows that stocks with this combination produce surprisingly good about 70% of the timeand Zacks firm position increase the predictive power of Earnings ESP.
Please note that a negative Earnings ESP calculation does not necessarily indicate that you have missed out. Our research shows that it is difficult to predict the earnings beat with any reliability for stocks that have unquantified ESPs and/or a Zacks Rank of 4 (Sell) or 5 (Strong Sell).
How Have the Numbers Made Hanover Insurance?
For Hanover Insurance, the consensus estimate is higher than the Zacks Consensus Estimate, indicating that analysts will soon change the company’s earnings. This resulted in an ESP Profit of +0.79%.
On the other hand, the stock has a Zacks Rank of #3.
Therefore, this combination indicates that Hanover Insurance will significantly beat the EPS estimate.
Does the Amazing Profit History Have Any Information?
Analysts often consider the extent to which a company has been able to match past commitments when calculating future earnings. Therefore, it is important to look at the amazing history in order to measure its attractiveness for the upcoming number.
In the last reported quarter, it was expected that Hanover Insurance will post a profit of $3 per share while generating a profit of $3.26, giving a surprise of +8.67%.
Over the past four years, the company has beaten EPS estimates four times.
Profit margins or misses may not be the only basis for a stock going up or down. Many stocks can lose ground even if they earn a lot of money due to some factors that frustrate investors. Similarly, unexpected developments help several stocks to gain even though they are making money.
That said, betting on stocks that are expected to exceed expectations increases the odds of winning. That’s why it’s worth looking at a company’s Earnings ESP and Zacks Rank before quarterly releases. Make sure to use it ESP Filters for Access uncovering the best stocks to buy or sell before they say.
Hanover Insurance appears to be the winner. However, investors should pay attention to other factors when betting on this stock or stay away from earnings before it is released.
Expected Results of an Industry Player
Among stocks in the Zacks Insurance – Property and Casualty industry, First American Financial (FAF) is expected to post earnings of $1.62 per share for the quarter ending June 2022. This estimate represents a year-over-year change of -23.9%. Revenue for the quarter is expected to be $2.15 billion, down 5.2% from the previous quarter.
Over the past 30 days, First American Financial’s EPS estimate has changed 15.8% year-to-date. However, the company now has an Earnings ESP of 0.00%, indicating a Very Accurate Equity Ratio.
When combined with a Zacks Rank of #5 (Strong Sales), this Earnings ESP makes it difficult to predict with certainty that First American Financial will beat EPS estimates. Over the past four quarters, the company has exceeded EPS estimates three times.
Stay on top of upcoming announcements with a Zacks Earnings Calendar.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.