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Will RLI Corp. (RLI) Earnings Surprise Again This Season? - Analyst Blog

Zacks Equity Research
Updated

RLI Corp. (RLI) is set to report fourth-quarter and full-year 2014 results on Jan 26. Last quarter, the company posted a 13.33% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors Influencing This Past Quarter

The favorable catastrophe environment which induced an improvement in underwriting performance and better pricing supported by a favorable rate environment will likely drive results.

The addition of a new health care liability division providing coverage to integrated hospital systems, long-term care facilities (single and multi-location), outpatient care facilities and clinical research providers across all the states will also add scale to its premiums.

Although the interest rate environment is still soft, a larger invested asset base and stable reinvestment rates will also boost investment results in the quarter to-be reported.

However, increasing expenses and higher debt levels will weigh on margin expansion.

Earnings Whispers?

Our proven model does not conclusively show that RLI Corp. is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP: RLI Corp. has 0.00% earnings ESP. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 60 cents.

Zacks Rank: RLI Corp.’s Zacks Rank #3 (Hold). Though a Zacks Rank #1, 2 or 3 increases the predictive power of ESP, the company’s ESP of 0.00% makes surprise prediction difficult.

We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as these have the right combination of elements to post an earnings beat this quarter:  

Platinum Underwriters Holdings Ltd (PTP) earnings ESP of +13.60% and a Zacks Rank #1 (Strong Buy).

The Allstate Corporation (ALL), earnings ESP of +3.05% and a Zacks Rank #1.

The Chubb Corporation (CB), earnings ESP of +1.39% and a Zacks Rank #1.
 


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RLI CORP (RLI): Free Stock Analysis Report
 
CHUBB CORP (CB): Free Stock Analysis Report
 
ALLSTATE CORP (ALL): Free Stock Analysis Report
 
PLATINUM UNDRWT (PTP): Free Stock Analysis Report
 
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Zacks Investment Research