The upcoming reporting season could prove to be a particularly anxious time for investors with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) flirting with highs not seen in a decade. Investors aren’t in a forgiving mood when market valuations are priced for perfection, and any company that dares deliver bad news will be harshly dealt with. One blue-chip that is at risk of being cast into the sin bin next month is QBE Insurance Group Ltd (ASX: QBE), warn the analysts at Macquarie Group Ltd (ASX: MQG). The insurer has a new chief executive and chief financial officer at its helm and…
To keep reading, enter your email address or login below.
The upcoming reporting season could prove to be a particularly anxious time for investors with the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) flirting with highs not seen in a decade.
Investors aren’t in a forgiving mood when market valuations are priced for perfection, and any company that dares deliver bad news will be harshly dealt with.
The insurer has a new chief executive and chief financial officer at its helm and it could look to reset market expectations downwards to give itself more breathing room.
It’s worth noting that QBE has a poor track record at meeting its Combined Operating Ratio (COR) target of 93%. The broker points out that the company has failed to deliver on this target in seven of the last ten halves.
The new managers may use the upcoming reporting season to lower the ratio and that will trigger a de-rating in the stock, said Macquarie.
A 100-basis point change in COR will equate to around a 10% change in consensus forecast for QBE’s earnings per share (EPS).
What’s more, expectations that QBE’s revenue could be bolstered by a big increase in global premiums will need to be pared back.
Macquarie noted that premium increases around the world have been modest at 3% to 5% for the January 1 renewals.
All these factors could cast a long shadow over QBE’s upcoming results on 26 February, and that is why the broker has downgraded the stock to “neutral” from “outperform” with a price target of $11.70.
The silver lining is that QBE has been a woeful performer over the past year with little good news priced into the stock.
Shares in the company are down close to 15% over the past 12-months compared to fellow insurers Suncorp Group Ltd (ASX: SUN) with a 1% loss, and Insurance Australia Group Ltd (ASX: IAG), which has surged 16% over the period.
Are you looking for blue-chips with better growth prospects? The experts at the Motley Fool have uncovered three that are well placed to outperform this year.
Click on the link below to get your free report on what these stocks are.
For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..
But knowing which blue chips to buy, and when, can be fraught with danger.
The Motley Fool's in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool's Top 3 Blue Chip Stocks for 2018."
Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.
The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand - and how quickly the share prices of these companies moves - we may be forced to remove this report.
Click here to claim your free report.
Motley Fool contributor Brendon Lau owns shares of Macquarie Group Limited. The Motley Fool Australia owns shares of Insurance Australia Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.