We expect property and casualty insurer, RenaissanceRe Holdings Ltd. (RNR) to beat expectations when it reports second-quarter 2014 earnings on Jul 29, 2014.
Why a Likely Positive Surprise?
Our proven model shows that RenaissanceRe is likely to beat earnings because it has the right combination of two key components.
Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.71%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.
Zacks Rank: RenaissanceRe carries a Zacks Rank #2 (Buy). Note that stocks with Zacks Ranks #1, 2 and 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 #2 (Buy) and +1.71% ESP makes us confident of an earnings beat in the coming week.
What is Driving the Better-Than-Expected Earnings?
RenaissanceRe’s efficient capital management is expected to boost investor sentiment on the stock. An increase in the company’s share repurchase authorization during the quarter is particularly expected to lead to an earnings beat. Moreover, improving operational performance in the Specialty Reinsurance and Lloyd’s segments are likely to aid premiums and hence earnings as well.
The positive trend is seen in the trailing three-quarter average surprise of 43%, which was greatly aided by the 11.89% positive earnings surprise in the last reported quarter.
Other Stocks to Consider
RenaissanceRe is not the only stock looking up this earnings season. We also see likely earnings beats coming from these three companies in the same sector:
United Insurance Holdings Corp. (UIHC) has Earnings ESP of +2.33% and a Zacks Rank #1 (Strong Buy).
Arch Capital Group Ltd. (ACGL) has Earnings ESP of +5.10% and a Zacks Rank #2.
HCC Insurance Holdings Inc. (HCC) has Earnings ESP of +2.25% and a Zacks Rank #2.
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