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We expect private mortgage insurer MGIC Investment Corp. (MTG - Analyst Report) to beat expectations when it reports fourth-quarter 2014 results on Jan 23, 2014.

Why a Likely Positive Surprise?

Our proven model shows that MGIC Investment is likely to beat earnings because it has the right combination of two key ingredients –

Positive Zacks ESP: Earnings Surprise Prediction or  Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at 50.0%. This is very meaningful and a leading indicator of a likely positive earnings surprise.

Zacks Rank #3 (Hold): Note that stocks with a Zacks Ranks  #1, 2 or 3 have a significantly higher chance of beating earnings. 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.

The combination of MGIC Investment’s Zacks Rank # 3 (Hold) and 50.0% ESP makes us very confident in looking for a positive earnings beat on Jan 23.

What is Driving the Better-than-Expected Earnings?

MGIC Investment has seen favorable operating trends driven by improvement in the housing market, lower delinquencies, lower claims paid and a pick-up in mortgage insurance demand.

The recovering demand for home purchases is consequently driving up demand for mortgage loan, reflected by strong new business written by MGIC Investment in the recent months. The company is also benefiting from regaining market share from the Federal Housing Authority.

Other Stocks to Consider

MGIC Investment is not the only firm looking up this earnings season. 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:  

FBL Financial Group Inc. (FFG - Snapshot Report), earnings ESP of +4.5% and a Zacks Rank #1(Strong Buy).

Prudential Financial Inc. (PRU - Analyst Report), earnings ESP of +0.45% and a Zacks Rank #1..

Loews Corp. (L - Analyst Report), earnings ESP of +21.7% and a Zacks Rank # 2 (Buy).

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