We expect the property and casualty insurer AXIS Capital Holdings Limited (AXS) to beat expectations when it reports fourth-quarter and full-year 2014 results on Feb 3 after the market closes.
Why a Likely Positive Surprise?
Our proven model shows that AXIS Capital 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 +1.68%. This is a meaningful and leading indicator of a likely positive earnings surprise for the company.
Zacks Rank: AXIS Capital 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?
AXIS Capital’s Insurance segment is positioned to benefit from the better performing professional, accident and health, and liability businesses. The Reinsurance segment will likely benefit from the improving liability, motor and professional lines of businesses. Continued expansion in agriculture business will further boost results.
A benign catastrophe environment will drive underwriting income and subsequently the combined ratio.
A lower share count by virtue of share repurchases will provide an additional upside to the bottom line.
Positives at the company are likely to overshadow rising expenses, which erode margins, and a soft interest rate environment. These weigh on the company’s investment results.
Management estimated operating earnings between $1.15 and $1.21 per share in the fourth quarter.
AXIS Capital outperformed the Zacks Consensus Estimate twice in the last three reported quarters, with an average surprise of 10.28%.
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:
The Allstate Corporation (ALL), Earnings ESP of +1.21% and a Zacks Rank #1 (Strong Buy).
The Hartford Financial Services Group, Inc. (HIG), Earnings ESP of +1.08% and a Zacks Rank #2 (Buy).
The Hanover Insurance Group, Inc. (THG), Earnings ESP of +0.68% and a Zacks Rank #2.
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