JP Morgan Lowers Estimates On ACE Limited Despite Decent 4Q Results

JP Morgan has published a research report on ACE Limited ACE after the company's 4Q EPS because JP Morgan's estimates, yet JP Morgan still was compelled to lower estimates on the company due to weaker guidance. In the report, JP Morgan writes "ACE Limited reported 4Q EPS of $2.05 versus our estimate of $1.89 and consensus of $1.85. If one were only to look at 4Q, the takeaways in the quarter would be mostly in-line with a few more positives than negatives. Unfortunately, 2011 EPS guidance, which appears lower than we would have anticipated, is likely to overshadow results. Specifically, ACE expects 2011 EPS of $6.10-$6.50 including normal catastrophes and assuming no development. Our previous estimate, adjusting for development and catastrophes (see page 3), was modestly above the high-end of management guidance as was consensus. Despite the EPS reduction, we remain constructive on the stock given we believe its business mix remains defensive to deteriorating non-life insurance fundamentals, especially in the US. In addition, the EPS reductions do not materially change our views of absolute or relative valuation. However, we do recognize that stocks have been trading directionally with EPS estimates for 2011 this quarter, so lower guidance likely means a negative short-term reaction in the stock." JP Morgan maintains its Overweight rating and $69 price target. ACE Limited closed yesterday at $62.50.