Will RLI Corp. (RLI) Miss on Earnings in Q2?


RLI Corp. (RLI) is set to report its second-quarter 2014 results on Jul 16. Last quarter, the company posted a 5.56% positive earnings surprise. Let’s see how things are shaping up for this announcement.

Factors Influencing This Past Quarter

The company has been experiencing increasing expenses and higher debt levels. The cost of debt kept margins under pressure. These will perhaps outweigh the absence of any significant cat events that might have aided its underwriting results, better market conditions and new product offerings.

Earnings Whispers?

Our proven model does not conclusively show that RLI Corp. is likely to beat earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Zacks ESP:  RLI Corp. has 0.00% earnings ESP. This is because both the Most Accurate estimate and Zacks Consensus Estimate stand at 66 cents.

Zacks Rank: RLI Corp.’s Zacks Rank #3 (Hold) increases the predictive power of earnings surprise, However, when combined with a 0.00% earnings ESP, surprise prediction becomes difficult. We caution against stocks with Zacks Ranks #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows these have the right combination of elements to post an earnings beat this quarter: 

Arch Capital Group Ltd. (ACGL), earnings ESP of +6.32% and a Zacks Rank #1 (Strong Buy).

W.R. Berkley Corporation (WRB), earnings ESP of +2.41% and a Zacks Rank #1.

Endurance Specialty Holdings Ltd. (ENH) earnings ESP of +1.37% and a Zacks Rank #1.

Read the Full Research Report on RLI
Read the Full Research Report on WRB
Read the Full Research Report on ENH
Read the Full Research Report on ACGL

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