Travelers Cos Third Quarter Earnings Preview

Travelers Cos (NYSE:TRV) will announce its third quarter earnings on Thursday, October 18, 2012. Analysts have become increasingly bullish on the company in the last month, with consensus earnings per share estimate moving up from $1.32 a share to the current expectation of earnings of $1.52 a share.



Earnings play an important role in measuring the appropriate valuation for a stock. Investors should be cautious if the company's stock price is high but it consistently has low earnings. SEE: Surprising Earnings Results

What to Expect: The consensus estimate for Travelers' earnings is $1.52 per share, up 92.4% from a year ago when the company reported earnings of 79 cents per share.

This is an increase from $1.27 three months ago. Analysts are expecting earnings of $6.43 per share for the fiscal year.

Travelers is expected to report revenue of $5.78 billion for the quarter, down by 9.8% from last year's figure of $6.41 billion. Revenue for the fiscal year is expected to come in at $22.78 billion.



Company Performance: Revenue fell year-over-year in the second quarter after increasing for the two previous quarters. It dropped 0.5% in the second quarter. Before that, revenue has risen 1.8% in the first quarter and 0.6% in the fourth quarter of the last fiscal year.

TRV has a P/E ratio of 12.4, high compared to the industry average of 11.33. This could mean that the market is expecting big things over the next few months or years. A company's price/earnings ratio (P/E ratio) provides a measure of how expensive or cheap a stock is. From the investor's perspective, a stock with a lower ratio is relatively cheaper than a stock with a higher ratio. SEE: How To Find P/E And PEG Ratios



Over the past quarter, the stock price has risen to $68.72 from $63.31 on July 17, 2012. Currently, Travelers' stock is on a downward trend. The share price has fallen 84 cents since October 5, 2012.





The Competition: The Travelers Companies is a holding company that is engaged in providing commercial and personal property and casualty insurance products and services to businesses, government units, associations and individuals. Eleven of 21 analysts rate Travelers a hold. In the last three months, the number of buy ratings has increased slightly.

The company's closest competitor in the insurance (prop. and casualty) industry is Chubb (CB). Analysts are more optimistic about Travelers than about Chubb. Only nine out of 19 analysts rate the latter a buy compared to 10 of 21 for the former.