We expect property and casualty insurer ACE Limited (ACE) to beat expectations when it reports fourth-quarter and full-year 2014 results on Jan 27.
Why a Likely Positive Surprise?
Our proven model shows that ACE Limited 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 at +2.20%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: ACE Limited carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #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.
What's Driving the Better-Than-Expected Earnings?
While underwriting results will be aided by a favorable catastrophe environment, better pricing owing to a favorable rate environment will add an upside to the premiums written.
Its acquisitions will keep the inorganic growth momentum steady resulting in improved topline.
Although the interest rate environment is still soft, a larger invested asset base will also boost investment results in the quarter to-be reported. Management estimates the quarterly investment income run rate at $550 million.
A lower share count via continued share buybacks will also boost the bottom line.
The positive trend is evident by the trailing four-quarter average earnings beat of 10.90% driven by better underwriting results.
Other Stocks to Consider
Here are some other companies you may want to consider as these too have the right combination of elements to post an earnings beat this quarter:
Platinum Underwriters Holdings Ltd. (PTP), Earnings ESP of +13.60% and a Zacks Rank #1 (Strong Buy).
The Allstate Corp. (ALL), Earnings ESP of +3.05% and a Zacks Rank #1.
The Chubb Corp. (CB), Earnings ESP of +1.39% and a Zacks Rank #1.
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