American International Group Inc. (AIG) is set to report FQ4 2013 earnings after the market closes on Thursday, February 13th. AIG is an American multinational insurance corporation that provide property casualty insurance, life insurance and retirement services, and mortgage insurance. Back in 2008, AIG took a record breaking $182.3 billion bailout from the federal government to escape trouble the company got itself into during the subprime mortgage crisis. In December 2012, AIG managed to finish repaying its debt to the U.S. government. This December, AIG announced it has entered into a deal to have its International Lease Finance Corp. acquired by AerCap with AIG, taking a 46% stake in AerCap. This quarter, Wall Street is expecting EPS to be down significantly compared to last year but for revenue to be up 14%. Here's how investors expect AIG to report Thursday.
The information below is derived from data submitted to the Estimize.com platform by a set of Buy Side and Independent analyst contributors.
The current Wall Street consensus expectation is for AIG to report 96c EPS and $9.840B revenue while the current Estimize.com consensus from 17 Buy Side and Independent contributing analysts is 98c EPS and $9.885B revenue. This quarter, the buy-side as represented by the Estimize.com community, is expecting AIG to beat Wall Street's expectations on both EPS and revenue.
Throughout the previous 4 quarters, the consensus from Estimize.com has been more accurate than Wall Street in forecasting AIG's EPS every time but has struggled to be more accurate than the Street on revenue. By tapping into a wider range of contributors including hedge-fund analysts, asset managers, independent research shops, students, and non professional investors, Estimize has created a data set that is up to 69.5% more accurate than Wall Street, but more importantly it does a better job of representing the market's actual expectations. It has been confirmed by an independent academic study from Rice University that stock prices tend to react with a more strongly associated degree to the expectation benchmark from Estimize than from the Wall Street consensus.
The magnitude of the difference between the Wall Street and Estimize consensus numbers often identifies opportunities to take advantage of expectations that may not have been priced into the market. In this case, we are seeing a smaller differential than usual for AIG.
The distribution of estimates published by analysts on the Estimize.com platform range from 80c to $1.10 EPS and $9.000B to $11.500B in revenues. This quarter, we're seeing a larger distribution of estimates for AIG on EPS and a smaller distribution on revenue.
The size of the distribution of estimates relative to previous quarters often signals whether or not the market is confident that it has priced in the expected earnings already. A wider distribution of estimates, signaling less agreement in the market, could mean greater volatility post earnings.
Throughout the quarter, the EPS consensus from Wall Street increased from 90c to 96c while the Estimize EPS consensus pushed higher from 94c to 98c. Over the same time period, Wall Street raised its revenue expectation from $9.699B to $9.840B while the Estimize consensus fell from $10.360B to $9.885B. Timeliness is correlated with accuracy, and going into the report, we saw rising EPS expectations and a falling revenue consensus from the Estimize community.
The analyst with the highest estimate confidence rating this quarter is sana5000 who projects $1.01 EPS and $9.871B in revenue. In the Winter 2014 season, sana5000 is rated as the 52nd best analyst and is ranked 56th overall among over 3,850 contributing analysts. Estimate confidence ratings are calculated through algorithms developed by deep quantitative research which looks at correlations between analyst track records and tendencies as they relate to future accuracy. In this case, sana5000 is expecting American International Group to beat expectations on profit but report between the Wall Street and Estimize consensuses on revenue.
This quarter contributing analysts on the Estimize.com platform are expecting AIG to beat Wall Street on both EPS and revenue. AIG may still leave a sour taste in the mouths of many for its part in the 2008 subprime mortgage crisis, but the company has repaid the money it owed and is looking to continue to increase shareholder value by spinning off International Lease Finance Corp. to AerCap.
Disclosure: No positions.