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Will XL Group (XL) Turn It Around This Earnings Season?

XL PRA CNA AHL

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XL Group plc (XL - Analyst Report) is set to report fourth-quarter 2013 results on Feb 5. Last quarter, the company posted a 1.85% negative surprise. Let’s see how things are shaping up for this announcement.

Growth Factors This Past Quarter

With strong international exposure and a diversified product suite, we believe the company is well positioned to write higher premiums to fuel top-line growth for the fourth quarter of 2014.

With a strong balance sheet and its ability to generate healthy cash flow, we expect the company to indulge in more buybacks, thereby lowering the share count and boosting the bottom line.

On the tepid side, XL Group has substantial exposure to losses resulting from natural and man-made disasters and other catastrophic events. Net investment income at XL Group has been on a declining trend for the past few years, With performance closely linked to credit markets, the exposure to these assets can further cause volatility in investment earnings.

Earnings Whispers?

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

Positive Zacks ESP:  That is because the Most Accurate estimate stands at $0.87 while the Zacks Consensus Estimate is lower at $0.84. That leads to a difference of +3.57%.

Zacks Rank: XL Group’s Zacks Rank #4 (Sell) when combined with a positive ESP 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 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:
 
CNA Financial Corporation (CNA - Snapshot Report), earnings ESP of +22.3% and a Zacks Rank #2 (Buy).

ProAssuarance Corporation (PRA - Analyst Report), earnings ESP of +13.59% and a Zacks Rank #2.

Aspen Insurance Holdings Ltd. (AHL - Snapshot Report), earnings ESP of +3.57% and a Zacks Rank #3 (Hold).
 

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