We expect insurance broker Willis Group Holdings plc (WSH) to beat expectations when it reports fourth-quarter and full-year 2014 results on Feb 10, after the market closes.
Why a Likely Positive Surprise?
Our proven model shows that Willis Group is likely to beat earnings because it 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 +4.44%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: Willis Group carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #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.
What is Driving the Better-Than-Expected Earnings?
Willis Group’s strategic acquisitions, besides solidifying its global Human Capital and Benefits practice, along with Employee Benefits Business, will drive top line improvement through increase in commissions and fees.
Willis Group will continue to realize costs savings from its Operational Improvement Program. This in turn will aid margin expansion. Costs savings for 2014 is estimated at $8 million. Also, expense management initiatives will contribute to earnings improvement.
A lower count attributable to active share repurchases will also provide an upside to the bottom line.
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:
Assured Guaranty Ltd. (AGO), Earnings ESP of +13.04% and a Zacks Rank #1 (Strong Buy).
Arch Capital Group Ltd. (ACGL), Earnings ESP of +0.95% and a Zacks Rank #1.
Radian Group Inc. (RDN), Earnings ESP of +13.89% and a Zacks Rank #2 (Buy).
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