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Travelers is slated to release its Q4 and full-year 2019 results on January 23, 2020. For FY 2019, Trefis estimates that the company will report:Core Revenues would increase to $29.1 billion primarily due to growth in business and personal insurance segments. However, it would be still lower than the consensus estimate of $29.2 billion.EPS would improve to $9.93 due to a combination of higher revenues and a steady decrease in shares outstanding. Further, it would beat the consensus earnings estimate of $9.58.
We believe that stronger-than-expected earnings for FY 2019 would offset the revenue miss, resulting in no significant movement in the Travelers' stock price once earnings are announced. Our forecast indicates that Travelers' valuation is $142 a share, which is roughly at the same level as the current market price.
(1) Revenues are expected to slightly miss consensus estimates
Trefis estimates Travelers' 2019 core revenues to be $29.1 billion, marginally below the consensus estimate of $29.2 billion
Trefis Estimate of Total Revenues
(1) Business Insurance $16.0 Bil (51%)
(2) Personal Insurance $10.5 Bil (33%)
(3) Bond & Specialty Insurance $2.6 Bil (8%)
(4) Investment of Insurance Premiums
$2.6 Bil (8%)
TOTAL $31.7 Bil
Core Revenue $29.1 Bil(*)
Consensus $29.2 Bil
Surprise -($0.05) Bil(**)
(*) - The Core Revenue figure is calculated by subtracting Investment of Insurance Premiums from total revenues.
(**) - Numbers don't add up due to rounding
(2) EPS likely to narrowly beat consensus estimates
Travelers' 2019 earnings per share (EPS) expected to be $9.93 per Trefis analysis, 3.7% above the consensus estimate of $9.58 per share
EPS - 2019E
Total Revenues $31.7 Bil
- Total Expenses $29.1 Bil (*)
Net Income $2.6 Bil
÷ Shares Outstanding 259 Mil
(*) - The expense figure includes preferred dividend and other minority expenses
(3) Stock price estimate ~same as the market price
Trefis' forecast for Travelers' 2019 earnings is slightly higher than the market estimates, although P/E multiple is lagging. This works out to a fair value of $142 for TRV's stock as opposed to the current market price around $141
Travelers' Share Price [= A x B]
EPS - 2019E [A]
Trailing P/E Multiple [B]
Details about our forecast for Travelers' (1) Revenues, (2) EPS, and (3) P/E Multiple follow:
What about Revenues in 2020?
See Travelers Revenue - How Does Travelers Make Money?
We provide an interactive, in-depth view of the company's revenues along with our forecasts and a comparison of trends with peers AIG, Hartford Financial and MetLife
Key for 2020: We expect Travelers to add $1.3 billion in incremental revenues by 2020, enabling the total revenue figure to cross $33 billion.
Travelers Valuation: Expensive or Cheap?Travelers Stock (NYSE:TRV)More Trefis Insurance Industry Data
What about Expenses and Earnings in 2020?
Key for 2020: We believe that revenue and expenses would grow at a similar rate in 2020, enabling the net income margin figure to hover around the 2019 figure of 8.1%.
(3) A trailing P/E multiple of 14.3x looks appropriate for Travelers' stock, which is slightly lower than the current implied P/E multiple of 14.7x
We use our full cash flow model for Travelers to arrive at a P/E multiple of 14.3x for a price estimate of $142
Note: P/E Multiples are based on Share Price at the end of the year, and reported (or expected) Adjusted Earnings for the full year
P/E Multiple TRV
P/E Multiple MET
P/E Multiple HIG
P/E Multiple AIG
Our complete set of analyses on Travelers
1. How to save your forecasts for Travelers:
Click on the blue "Try Trefis" button in the header to create an account, then navigate back to this dashboard. Now, any changes you make to these inputs will be auto-saved as a scenario (see left panel of dashboard).
2. How to monitor your scenario vs. actual results
Once you've saved your forecast, you can "rename" your scenario by clicking on the gear icon next to the scenario (on the left panel). For more info, see this quick, 30-sec video (look at the 9 sec mark)
With your forecast saved and named, you can compare your forecasts to hundreds of other Trefis users who came up with their own forecasts. Lastly, you can share with friends and colleagues to show them how you fared and compare your forecasts to theirs.