Here's What The Buy Side Expects From AIG

May. 5.14 | About: American International (AIG)

American International Group, Inc. (NYSE:AIG) is set to report FQ1 2014 earnings after the market closes. AIG is an American multinational insurance corporation that provides insurance on life, property, and mortgages, and provides other retirement services. Back in 2008, AIG took a record-breaking $182.3-billion dollar bailout from the federal government to escape trouble the company got itself into during the subprime mortgage crisis. This quarter, Wall Street is expecting AIG to report a loss of 26c per share in earnings and a 17% gain in revenue compared to FQ1 of last year. Here's what investors are expecting from AIG.

The information below is derived from data submitted to the platform by a set of Buy-side and Independent analyst contributors.

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(Click Here to see Estimates and Interactive Features for AIG)

The current Wall Street consensus expectation is for AIG to report $1.08 EPS and $10.003B revenue, while the current consensus from 13 Buy-side and Independent contributing analysts is $1.10 EPS and $10.342B in revenue. This quarter, the buy side, as represented by the community, is expecting AIG to beat Wall Street's expectations on both EPS and revenue.

Over the past 4 quarters for which we have data, the consensus from has been more accurate than Wall Street in forecasting AIG's EPS every time, but Wall Street has been more accurate 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 more accurate than Wall Street up to 69.5% of the time, but more importantly, it does a better job of representing the market's actual expectations. It has been confirmed by Deutsche Bank (NYSE:DB) Quant. Research and 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 small-to-moderate difference between the expectations from Estimize and Wall Street.

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The distribution of estimates published by analysts on the platform range from 95c to $1.30 EPS and from $8.800B to $13.600B in revenues. This quarter, we're seeing a wide range of estimates on AIG.

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 narrow distribution of EPS estimates signals more agreement in the market, which could mean less volatility post-earnings.

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Throughout the quarter, the Wall Street EPS consensus rose from $1.06 to $1.08, while the Estimize consensus fell from $1.13 to $1.10. Meanwhile, the Wall Street revenue consensus remained relatively flat, while the Estimize consensus tumbled from $11.273B to $10.342B. Timeliness is correlated with accuracy, and downward analyst revisions going into an earnings report are often a bearish indicator.

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The analyst with the highest estimate confidence rating this quarter is sana5000, who projects $1.10 EPS and $9.963B in revenue. sana5000 is ranked 57th overall among over 4,400 contributing analysts. Over the past year, sana5000 has been more accurate than Wall Street in forecasting EPS and revenue 57% and 46% of the time, respectively, throughout 180 estimates. 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 AIG to report in line with the Estimize community's EPS consensus, but come up slightly short on revenue.

Contributing analysts on the platform expect AIG to outperform the expectations from Wall Street on both the top and bottom line by a small margin.

Disclosure: None