ACE Third Quarter Earnings Preview

ACE (NYSE:ACE) will announce its third quarter earnings on Tuesday, October 23, 2012. Analysts have become increasingly bullish on the company in the last month, with consensus earnings per share estimate moving up from $1.70 a share to the current expectation of earnings of $1.82 a share.



Earnings are perhaps the single most studied number in a company's financial statements because they show a company's profitability. SEE: Everything Investors Need To Know About Earnings

What to Expect: The consensus estimate has slipped from $1.87 in the last 90 days. Analysts are expecting earnings of $7.91 per share for the fiscal year.

Revenue for the quarter is expected to be $4.29 billion, short of last year's reported figure of $4.29 billion by 0.1%. The anticipated revenue for the fiscal year is $15.94 billion.



Company Performance: ACE reported a decline in revenue in the second quarter, ending a three-quarter growth streak. After rising 9.9%in the first quarter, 1.6% in the fourth quarter of the last fiscal year and 10.4% in the third quarter of the last fiscal year, it fell 7.7% in the most recent quarter.

ACE's P/E ratio of 13.4 is above the industry average of 11.33. A company with a high P/E ratio will eventually have to live up to the high rating by substantially increasing its earnings, or the price will need to drop. There are generally two price/earnings ratios calculated: the first, called the trailing Price/Earnings ratio, is calculated using the previous years actual earnings; the second, called forward Price/Earnings ratio, is calculated using the next year's estimated earnings. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: Understanding The P/E Ratio



Over the past quarter, the stock price has increased from $70.78 on July 20, 2012 to $79.29. The price is within 6 cents of its 52-week high ($79.35), which was set on October 17, 2012. ACE's best recent streak was when its price gained $2.92 per share between September 26, 2012 and October 5, 2012.





The Competition: ACE is a global provider of property and casualty insurance and reinsurance products to individuals and businesses. Analysts are optimistic about ACE, with 16 of 19 assigning it a buy rating. They have grown pessimistic about the stock, as the number of buy ratings has dropped slightly over the past three months.

The company's closest competitor in the insurance (prop. and casualty) industry is AIG (AIG). Analysts are more optimistic about ACE than about AIG. Only 10 out of 18 analysts rate the latter a buy.