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 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.
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