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We expect property and casualty insurer ACE Limited (ACE - Analyst Report) to beat expectations when it reports its second-quarter 2014 results on Jul 23.

Why a Likely Positive Surprise?

Our proven model shows that ACE Limited is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +0.89%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: ACE Limited has a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. The combination of ACE Limited’s Zacks Rank #3 and +0.89% ESP makes us very confident of an earnings beat this release. The Sell-rated stocks with Zacks Rank #4 or 5 should never be considered going into an earnings announcement.

What is Driving the Better-than-Expected Earnings?

A benign cat environment favoring underwriting results along with an impressive inorganic growth story is expected to drive ACE Limited’s results in the second quarter. A favorable rate environment that improved pricing would also lead to an upside.

Continued share buyback will boost the bottom line.

The positive trend is backed by the trailing four-quarter average surprise of 14.50%, much of which was contributed by the impressive 19.50% surprise achieved in fourth quarter of 2014. Better underwriting results continue to aid the company’s performance.

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 coming quarter:  

Berkshire Hathaway Inc.  (BRK.A - Snapshot Report), Earnings ESP of +6.62% and a Zacks Rank #1 (Strong Buy).

Montpelier Re Holdings Ltd. (MRH - Analyst Report), Earnings ESP of +11.34% and a Zacks Rank #2 (Buy).

Arch Capital Group Ltd. (ACGL - Snapshot Report), Earnings ESP of +5.10% and a Zacks Rank #2 .
 

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