Next Monday, Hartford Financial (NYSE: HIG ) will release its latest quarterly results. The key to making smart investment decisions on stocks reporting earnings is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.
Conditions in the insurance industry have been tough, with low interest rates and catastrophic events pressuring margins. Yet, even as its peers have taken steps to shore up their finances, Hartford has taken much more dramatic action to transform its entire business. Let's take an early look at what's been happening with Hartford Financial over the past quarter and what we're likely to see in its quarterly report.
Stats on Hartford Financial
| Analyst EPS Estimate | $0.83 |
| Change From Year-Ago EPS | (34%) |
| Revenue Estimate | $5.37 billion |
| Change From Year-Ago Revenue | (30%) |
| Earnings Beats in Past 4 Quarters | 2 |
Source: Yahoo! Finance.
How will Hartford Financial's earnings fare?
Analysts have been cautiously optimistic about Hartford's earnings prospects in recent months, with a net increase of $0.02 per share in their calls for the just-ended quarter. The stock has done quite a bit better, rising 13% since mid-January.
Like many insurance companies, Hartford felt a substantial impact from Hurricane Sandy in last quarter's results. Although the company's $350 million in losses was far less than the billion-dollar hits that Travelers and Allstate suffered, as well as the $2 billion pre-tax wallop that AIG felt from the storm, Hartford nevertheless owed its overall loss last quarter just about entirely to Sandy's effects.
But the good news for Hartford will come now and in future quarters, as insurance premiums are able to rise based on adverse loss experiences from Sandy and previous disasters. Already, Travelers has reported sharply better results because of a relatively uneventful quarter, and investors expect Allstate to show a similar recovery to Travelers and Hartford.
Yet, the true measure of Hartford's confidence in its property and casualty insurance business comes from the fact that it has followed a similar strategy to AIG by selling off many of its other businesses, including the individual life-insurance and annuity areas as well as its retirement plans business. Annuity and life-insurance products that offered guarantees to policyholders, which protected them from adverse movements in the stock market, hurt Hartford quite a bit. Having taken years to recover, Hartford will much more closely resemble a pure P&C insurer going forward, although it will retain some other ancillary coverage lines.
In Hartford's report, watch for the company's outlook on the returns from its investment portfolio going forward. With many companies taking on more risk to try to drive better gains from investments, you'll want to gauge where Hartford stands among its peers.
At the end of last year, AIG was the favorite stock among hedge fund managers. Have they identified the next big multi-bagger, or are the risks facing the insurance giant still too great? In The Motley Fool's premium report on AIG, Financials Bureau Chief Matt Koppenheffer breaks down the key issues that you need to know about if you want to successfully invest in this stock. Simply click here now to claim your copy, and you'll also receive a full year of key updates and expert analysis as news continues to develop.
Click here to add Hartford Financial to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
No comments :
Post a Comment