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Will RLI Corp. (RLI) Pull a Surprise this Earnings Season?

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RLI Corp. (RLI - Free Report) is set to report second-quarter 2016 results on Jul 19, after the market closes. Last quarter, the company posted a positive earnings surprise of 3.85%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

RLI Corp. is likely to display growth in net premiums written owing to its impressive business expansion and stable rate environment. Further, the company anticipates growth in this metric in its Casualty and Surety segments in the to-be-reported quarter.

The company maintains underwriting profitability and is likely to have experienced favorable combined ratio in the to-be-reported quarter.

Moreover, the company has likely experienced modest growth in net sales in the second quarter.

However, RLI Corp. might witness increased expenses due to higher losses as well as policy acquisition costs, This, in turn, is likely to limit operating margin expansion.

Also, the company anticipates its Property segment to underperform. This is mainly due to continued soft market conditions.

With respect to surprise trend, the company delivered positive surprises in three of the last four quarters, with an average beat of 11.54%.

RLI CORP Price and EPS Surprise

RLI CORP Price and EPS Surprise | RLI CORP Quote

Earnings Whispers

Our proven model does not conclusively show that RLI Corp. is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: RLI Corp. has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at a loss of 63 cents.

Zacks Rank: RLI Corp. carries a Zacks Rank #3, which increases the predictive power of ESP. However, an ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

W.R. Berkley Corporation (WRB - Free Report) has an Earnings ESP of +4.94% and a Zacks Rank #3. The company is slated to report second-quarter earnings on Jul 25.

Loews Corporation (L - Free Report) has an Earnings ESP of +5.00% and a Zacks Rank #3. The company is set to report second-quarter earnings on Aug 1.

Argo Group International Holdings, Ltd. has an Earnings ESP of +3.19% and a Zacks Rank #2. The company is expected to report second-quarter earnings on Aug 2.

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