We expect insurance and reinsurance provider, RenaissanceRe Holdings Ltd. (RNR) to beat expectations when it reports fourth-quarter 2013 results on Feb 4, 2014.
Why a Likely Positive Surprise?
Our proven model shows that RenaissanceRe is likely to beat earnings because it has the right combination of the following two key ingredients.
Zacks ESP: Expected Surprise Prediction or Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, stands at +1.05%. This is a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank #3 (Hold): Note that stocks with Zacks Ranks #1, 2 or 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement.
The combination of RenaissanceRe’s Zacks Rank #3 (Hold) and +1.05% ESP makes us very confident of a positive earnings beat.
What is Driving the Better-Than-Expected Earnings?
RenaissanceRe’s specialty unit and Lloyd’s segment have been performing well for quite some time and improving macroeconomic conditions are expected to maintain the uptrend going forward. Moreover, the divestiture of the RenRe Energy Advisors Ltd. (REAL) in Oct 2013 frees RenaissanceRe of the uncertainties associated with the weather and weather-related energy risk management operations of REAL.
The global expansion of RenaissanceRe’s reinsurance business with the introduction of its U.S. platform – RenaissanceRe Underwriting Managers U.S. LLC – in Connecticut and efficient capital deployment are also expected to aid the quarter's results.
The positive trend is reflected in the trailing four-quarter average surprise of +37.2%, which was greatly supported by the +54.3% surprise in the last reported quarter. This was possible because the company did impressively well in enhancing premiums. Lesser catastrophes also boosted the results.
Other Stocks to Consider
RenaissanceRe is not the only firm looking up this earnings season. Other stocks in the same sector that have both a positive earnings ESP and a favorable Zacks Rank are:
FBL Financial Group Inc. (FFG), with Earnings ESP of +4.49% and a Zacks Rank #2 (Buy).
ING U.S. Inc. (VOYA), with Earnings ESP of +2.94% and a Zacks Rank #2.
CNA Financial Corporation (CNA), with Earnings ESP of +22.35% and a Zacks Rank #2.
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