(By Rich Bieglmeier) United Fire Group, Inc (UFCS) is expected to report earnings before the market opens on Monday, August 6, 2012. Management will host the conference immediately afterwards.
Wall Street anticipates that UFCS will earn $0.26 for its 2nd quarter. iStock expects the Property & Casualty Insurance Provider to report earnings that will exceed Wall Street's consensus number. The iEstimate is 40 cents – a 14 cent upside surprise.
It's been real simple for investors with United Fire, when the company exceeds expectations, the stock is on fire, and when the company performs poorly, shareholders are all wet.
The problem for investors is that most of the surprises have been on the downside. In the last three years, United Fire Group failed to hit the target eight of its last 12 quarterly checkups. The reaction to the misses hasn't been all that bad as the average loss is 5.3%, with half performing better or worse than the baseline and a max loss of 13.7%.
So, if UFCS does what it does 75% of the time, then you have a sense of downside.
The quartet of bullish eps beats has rewarded investors more handsomely. The insurance writer has been on a small hot streak, considering its history, beating the consensus view by 300% and 417% in back-to-back quarters.
When the United Fires is on the good side of Wall Street's forecasts, and in the good graces of traders, the stock profited by an average of 15% in the days surrounding earnings.
The stock price has crashed of late. It's not unexpected as property and casualty stocks have been on the bear side of our sector performance review for a few weeks. Shares should have decent technical support near Thursday's closing price of $18.69. With a plus day likely on tap to end the week, iStock doesn't see UFCS going any lower than $17.75 on the day.
If our iEstimate is correct, then United Fire Group, Inc (UFCS) could charge straight back to $20.75 on the news, provided management's conference call guidance is at least in line current expectation.
Without options, there is no way to protect yourself on the downside should you take the long position. However, there is a good omen in traders' favor; history shows that companies with good news to share do it early in the week. You can't get any earlier than before the bell rings Monday morning.