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We expect property and casualty insurer XL Group plc (XL - Analyst Report) to beat expectations when it reports second-quarter 2014 results on Jul 28.

Why a Likely Positive Surprise?

Our proven model shows that XL Group 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 +1.21%. This is a very meaningful and leading indicator of a likely positive earnings surprise.

Zacks Rank: XL Group has a Zacks Rank #2 (Hold). Note that stocks with a Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. The combination of XL Group’s Zacks Rank #2 and +1.21% ESP makes us 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 coupled with a favorable rate environment will aid the second quarter results. Also heightened focus on core operations via divesting non core units, establishing new operations will drive numbers higher.

Continued share buyback will boost the bottom line.

The positive trend is backed by the trailing four-quarter average surprise of 13.5%, much of which was contributed by the impressive 19.72% surprise in the last reported quarter.

Other Stocks to Consider

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

Montpelier Re Holdings Ltd. (MRH - Analyst Report), Earnings ESP of +5.10% and a Zacks Rank #2 (Buy).

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

RenaissanceRe Holdings Ltd. (RNR - Analyst Report), Earnings ESP of +1.71% and a Zacks Rank #2.

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