AIG and Palantir Q3 2024 Earnings Preview: Key Insights

AIG (AIG) Q3 2024 Earnings Preview

Earnings Release Date: November 4, 2024
Expected EPS: $1.13 (-29.8% YoY)
Expected Revenue: $6.62 billion (-41.7% YoY)

American International Group (AIG) is set to report its Q3 2024 earnings on November 4, 2024. Wall Street expects a year-over-year decline in both earnings and revenue. AIG is forecasted to post an EPS of $1.13, down 29.8% from the previous year, with revenues anticipated at $6.62 billion, a sharp 41.7% drop from the same quarter last year.

The insurer's stock has risen 12% year-to-date but has underperformed compared to its industry competitors, which have grown by around 20% over the same period.

In the last reported quarter, AIG posted an EPS of $1.16, missing expectations of $1.39 by -16.55%. Should AIG beat these Q3 expectations, the stock could see upward momentum; a miss, however, could drive it lower.

Factors Impacting AIG’s Performance:

1. Streamlined Operations and Core Focus:
   AIG has been focused on streamlining operations by shedding non-core assets to concentrate on core insurance businesses. The recent deconsolidation of Corebridge in Q2 is expected to reduce portfolio volatility, improve cash liquidity, and accelerate capital deployment.
2. Leadership Changes and Cost Discipline:
   Recent leadership changes are aimed at better aligning operations and increasing efficiencies. Adjustments to the business mix and cost discipline are likely to improve the company’s expense ratio, supporting higher operating margins in the future.
3. Valuation Concerns:
   AIG currently trades at 11.7x forward earnings, above its five-year median of 9.69x and the industry average of 9.27x. This higher valuation, combined with the company’s significant leverage and relatively low return on equity (ROE) of 9.52% (compared to the industry’s 16.09%), suggests that the stock may be overvalued relative to its peers.

Investment Outlook:

• Positives for Current Investors: AIG’s streamlined focus on core insurance operations and enhanced expense management could yield long-term benefits, making it an attractive hold for existing investors looking for stable growth and improved operating margins.
• Caution for New Investors: With AIG’s relatively high valuation, lower ROE, and significant debt-to-capital ratio, new investors may prefer to wait for a more favorable entry point. The upcoming earnings release may provide additional insights into the company’s operational efficiency and progress in achieving its strategic goals.

In summary, AIG’s focus on core insurance activities and operational improvements are promising for long-term growth, but higher-than-average valuation and leverage suggest that potential investors should approach with caution until more clarity from the earnings report.

Palantir (PLTR) Q3 2024 Earnings Preview

Earnings Release Date: November 4, 2024 (After Market Close)
Expected EPS: $0.09
Expected Revenue: $703.7 million (+26.1% YoY)

Palantir Technologies (NYSE: PLTR) will report its Q3 2024 earnings today after the market closes. Last quarter, Palantir exceeded revenue expectations by 3.9%, reporting $678.1 million in revenue, an increase of 27.2% year-over-year. For Q3, analysts project Palantir’s revenue to grow 26.1% YoY to $703.7 million, with adjusted earnings expected at $0.09 per share.

Key Highlights and Performance in 2024

1. Strong Market Performance
   Palantir’s stock has surged 142% in 2024, outperforming both the S&P 500’s 20.45% gain and the Tech-Software sector’s 15% increase. The stock has been supported by solid financial results and strategic partnerships.
2. Industry Comparisons
   Other companies in the data and analytics software space have recently reported their Q3 earnings. MicroStrategy reported a 10.3% YoY decline in revenue, missing estimates, while Commvault Systems reported a 16.1% increase, beating expectations. Investor sentiment in the data analytics sector has been positive, with stocks in the industry averaging a 6.4% gain in the last month, while Palantir has risen 7.8% during this period.
3. Strategic Partnerships and AI Integration
   In October, Palantir announced a partnership with defense firm L3Harris (LHX), leveraging Palantir’s AI-enabled data integration capabilities to optimize costs, improve supply chain visibility, and enable faster, informed decisions. This partnership has been highlighted as a strong move in AI-driven product development and strengthens Palantir’s position in the defense and commercial AI markets.
4. Inclusion in the S&P 500
   Palantir joined the S&P 500 index on September 23, opening the door for more mutual funds and institutional investors to buy into the stock. This inclusion reflects the company’s growing market significance and provides broader investor access.
5. Expansion into Generative AI for Commercial Markets
   Traditionally focused on government contracts in intelligence, counterterrorism, and military services, Palantir is expanding its AI capabilities to fuel growth in the commercial sector. The company’s Artificial Intelligence Platform (AIP) is showing promise, with clients reporting improvements in supply chain management, operational efficiencies, and patient care using Palantir’s AI technologies.

Outlook: Positives and Risks

• Positives:
• Palantir’s growing AI capabilities position it well for both government and commercial applications, with recent partnerships such as L3Harris reinforcing its role in defense and enterprise AI.
• The recent S&P 500 inclusion enables more institutional investment, potentially adding stability and increased demand for PLTR stock.
• Risks:
• High valuation due to the rapid stock price increase in 2024, which may lead to price volatility.
• Competitive pressures in the AI and data analytics space from other technology firms and emerging AI startups, which could impact market share.

Conclusion

Palantir’s Q3 2024 earnings report is expected to show strong revenue growth and solid earnings per share, bolstered by increased adoption of its AI technologies and new strategic partnerships. With its recent S&P 500 inclusion and expansion into commercial AI, Palantir is positioned for future growth, though investors should be mindful of valuation risks and the competitive landscape. The earnings results will likely give further insights into Palantir’s trajectory in both government and commercial sectors.