Business information services firm Verisk Analytics, Inc. (VRSK Quick QuoteVRSK - Free Report) is scheduled to report second-quarter 2016 results after the markets closes on Aug 2. In the last reported quarter, adjusted earnings missed the Zacks Consensus Estimate by 2 cents. Over the last four quarters, earnings beat estimates thrice, delivering an average positive earnings surprise of 7.78%.

Let’s see how things are shaping up for this announcement.

Key Factors in the Second Quarter

Verisk is focused on streamlining its business; as a result of this the company completed the sale of its healthcare business, worth $820 million.  The sale is expected to enhance the company’s focus on proprietary data analytics, which is its prime business.

During the quarter, 3E Company, a division of Verisk, announced the launch of its new employee and workplace safety stewardship capabilities. 3E offers 24/7/365 Occupational Safety & Health Administration (OSHA) occurrence notification and reporting services, hazard communication training materials, and single sign-on authentication services for its customers. This launch is expected to boost top-line growth of the company in the yet–to-be-reported quarter.

In addition, the company announced the expansion of its FireLine wildfire risk management service. Per the announcement, this service unit will expand across the Canadian provinces of Alberta and British Columbia. Based in the U.S., FireLine provides property-specific evaluation of wildfire risk that insurers use for various purposes which include underwriting, rating, and exposure management.

Also, AIR Worldwide (AIR) – a business unit of Verisk – has expanded its earthquake and typhoon models for Southeast Asia. This model will provide insurers with a comprehensive and up-to-date view of risk in the region. The new earthquake model is built to account for tsunami and liquefaction subperils for earthquake prone areas which include Indonesia, the Philippines, and Taiwan. Additionally, the model reach has been expanded to include the following countries and territories: Guam, Macau, Saipan, and Vietnam for typhoon risk; and Hong Kong, Macau, Vietnam, Singapore, Thailand, Brunei, and Malaysia for earthquake risk.  This footprint expansion will bode well for the company.

Earnings Whispers

Our proven model does not conclusively show that Verisk is likely to beat earnings this quarter as it lacks key components. 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. This is not the case here as you will see below:

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently at -1.32%.

Zacks Rank: Verisk carries a Zacks Rank #4 (Sell) which when combined with a negative ESP makes surprise prediction difficult.

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

Stocks to Consider

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

Expeditors International of Washington Inc. (EXPD Quick QuoteEXPD - Free Report) , earnings ESP of +1.70% and a Zacks Rank #3.

ONEOK Partners, L.P. , earnings ESP of +3.77% and a Zacks Rank #2.

Martin Marietta Materials, Inc. (MLM Quick QuoteMLM - Free Report) , earnings ESP of +1.96% and a Zacks Rank #3.

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