Earnings Preview: AIG

American International Group  (AIG) is expected to report Q2 earnings after market close today (Aug. 6) with a conference call scheduled for Thursday, August 7 at 8:30 am ET.

Guidance

Analysts are looking for EPS of 63c on revenue of $31.49B. The consensus range for EPS is (31c) to $1.30, while the consensus range for revenue is $31.11B to $31.87B, according to First Call.

Analyst Views

Research firms have had mixed outlooks on AIG in recent weeks. Societe Generale today initiated the insurer with a Sell rating, citing uncertainty about AIG's risk controls and the efficiency of its capital allocation. Conversely, UBS yesterday upgraded the insurer to Buy from Neutral, citing valuation. The firm contends that AIG's current valuation discounts its exposure to credit default swaps and insurance investments, while failing to account for the company's potential return on equity. Also, Banc of America upgraded AIG to Buy from Neutral in late July, as the firm found the company's risk/reward levels attractive.

AIG investors hope the company can perform better than MetLife (MET) and Prudential (PRU), both of which reported lower than expected Q2 profits recently.

Comments

[Keeping it ...:]

This is REALLY a great website but I wish the authors would give simple disclosure of Long, Short, or None.

2008 Aug 06 05:30 PM

[venividivici:]

17 analysts came up with an average of 63 cents EPS. AIG has announced a loss of over $2. How do these extraordinarily incompetent people keep their jobs? Answer, pretty much the whole of the financial system is a sick joke.
How much longer can this latest sucker rally go on for?

2008 Aug 06 08:55 PM

[palsboss:]

I sat up late on Wednesday night debating if I should go long or go short on AIG. In Tokyo, the U.S. market opens at 10:30PM. Perfect time to get in dinner, maybe a workout and a walk with the dog.

So SocGen downgrades it, UBS and BoA upgrades it, then analysts chime in with positive earnings expectations. So going against my instincts to short the stock from its opening price, I decide to pick up some shares at just under $29 bucks. I figure that maybe these idiots are right. Then at the close on Wednesday, AIG drops the equivalent of a financial A-Bomb (just like I suspected it would) and of course, it shaves-off over $4 bucks. To reduce my average share exposure I picked up some additional shares riding the price down. But now I sit with unrealized losses when I could have made a hefty profit in 1 day. Enough to buy an E-Class Benz.

So my conclusion is that analysts have no more particular skill than I have as a commoner. With the free research that is available out there and my gut instinct about where markets are going, I am far better off ignoring most analysts comments and sticking to my guns.

I suspect AIG will recover in the coming days as I think it is way oversold. I also think the loss, albeit huge, should not have surprised anyone given global metrics right now. So buy for the long-term, but trade on the volatility in the short.

And ignore the analysts. Go with your instinct. It is probably correct.

2008 Aug 08 12:46 AM