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Can RLI Corp. (RLI) Surprise This Earnings Season?


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RLI Corp. (RLI - Analyst Report) is set to report fourth-quarter 2013 results on Jan 22. Last quarter, the company had posted a surprise of 48.9%.  Let us see how things are shaping up for this announcement.

Growth Factors this Past Quarter

RLI Corp. is expected to benefit from diversification into crop and other assumed property reinsurance, expansion of its underwriting team, focus on new markets and product expansion opportunities.

A favorable rate environment is expected to aid results. Furthermore, a benign catastrophe environment should also boost RLI Corp.’s underwriting results.

RLI Corp. remains focused on returning value to its shareholders. It approved a special dividend of $3.00 in mid-Nov 2013, testifying the inherent strength of its balance sheet.

However, a low interest rate environment is expected to weigh on net investment results.

Earnings Whispers?

Our proven model does not conclusively show that RLI Corp. is likely to beat earnings this quarter. That 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.

Zero Zacks ESP:  That is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 56 cents. That leads to an ESP of 0.00%.

Zacks Rank #3 (Hold): RLI Corp.’s Zacks Rank #3 when combined with a zero earnings ESP makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

Aspen Insurance Holdings Ltd. (AHL - Snapshot Report) with earnings ESP of +8.49% and a Zacks Rank #1 (Strong Buy)

PartnerRe Ltd. (PRE - Analyst Report) with earnings ESP of +11.24% and a Zacks Rank #1

The Travelers Companies, Inc. (TRV - Analyst Report) with earnings ESP of +0.479% and a Zacks Rank #2 (Buy)

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