Travelers Cos. is the IBD Stock Of The Day as it eyes a breakout to all-time highs amid an earnings boom. The Dow Jones stock, an insurance play, rose on Wednesday near a buy point. Other insurance stocks broke out.
Rally For Dow Jones Stock
Travelers, a Dow Jones stock, has rallied 17% so far this quarter on earnings and the postelection rally.
A huge earnings beat on Oct. 17 led to a flurry of analyst price-target hikes, FactSet shows. But the average rating of 29 analysts covering Travelers stock is hold.
On Nov. 20, Janney Montgomery Scott analyst Robert Farnam joined that group, citing valuation concerns after a solid run for shares, according to TheFly.com.
Founded in 1853, Travelers provides commercial insurance and personal insurance, as well as bond and specialty insurance.
Broadly, the insurance market is undergoing vast change. Insurers are shifting regional coverage and underwriting policies, exiting some markets while increasing premiums and reducing coverage in others. The result is creating winners and losers, with larger players tending to pick up market share.
Industry peer Gallagher, an insurance broker, is a Long-Term Leader. Insurance is a core Berkshire Hathaway business. But app-based insurance upstarts Lemonade and Root have far outperformed their established peers in the past year.
Travelers Stock, Insurance Stocks
Shares of Travelers rose 1.1% on the stock market today, above all the shorter- and longer-term moving averages. Travelers stock neared a 269.56 buy point from a flat base, according to MarketSurge pattern recognition. Shares traded just 1% below the entry on Wednesday.
The relative strength line for TRV stock is rising fast but remains below the peak of the base for now. It would send a positive signal to see the RS line move to new highs as the Dow Jones insurance company tries to break out. A rising RS line means that a stock is outperforming the S&P 500 index. It is the blue line in the chart provided.
Travelers stock surged to all-time highs on earnings in October. It then shaped the six-week flat base, which formed entirely above the 50-day moving average, a favorable sign.
On Wednesday, Hartford Financial Services, an insurance stock, topped a 123.23 flat-base buy point. Class-B shares of Berkshire Hathaway stock cleared a 484.82 flat-base buy point intraday, but close below the entry.
Travelers Earnings Boom
The IBD Stock Checkup tool shows that Travelers stock earns a solid Composite Rating of 92 out of 99. The rating rolls various fundamental and technical metric into one easy-to-use score.
In terms of other key ratings, Travelers shows an RS Rating of 83. It flaunts a superior EPS Rating of 96, also out of a best-possible 99.
Earnings growth has averaged 1,422% over the past three quarters, vs. the more historically typical three-year rate of 2%. That reflects a huge earnings recovery amid higher underwriting volumes, higher interest rates and higher stock markets.
For the third quarter, Travelers delivered a 169% leap in operating earnings per share to $5.24, despite higher catastrophe losses. That far outpaced estimates for $3.66 and benefited from easy year-ago comparisons.
Travelers tied Q3 catastrophe losses mainly to Hurricane Helene.
In Q3, net premiums written rose almost 8% to record levels. The combined ratio, a key profitability metric, improved by almost 8 points to 93.2%. Net investment income jumped 18%.
Travelers also realized a net $42 million in after-tax investment gains. That contrasted with net realized investment losses in the year-ago quarter.
"Both underwriting income and underlying margins were strong in all three of our segments," Travelers Chief Executive Officer Alan Schnitzer said in a release.
He added: "With this momentum, we are very confident in our outlook for our business into 2025 and beyond."
Solid Outlook For Travelers, Financials
For the full year, analysts project Travelers earnings per share will grow 44.3%. That would compare with a 5.7% rise last year. Analysts expect a further 12.1% gain in 2025.
After the Nov. 5 U.S. election, financial stocks broadly led the stock market's Trump rally. The result stoked optimism about looser regulations on financial companies.
ut fears remain about challenges in commercial real estate putting the insurance industry at risk.
Year to date, Travelers stock has surged 40% on the back of two breakouts, while a third looms. It is the No. 7 top-performing Dow Jones stock in 2024 through Tuesday.
Please follow Aparna Narayanan on X @IBD_Aparna for more coverage.
