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Will XL Group (XL) Disappoint Earnings Estimates in Q3?

XL Group plcXL is set to report third-quarter 2015 earnings results on Oct 26, 2015. Last quarter, it posted a positive earnings surprise of 9.09%. Let us see how things are shaping up for this announcement.

Factors Affecting the Past Quarter

Last quarter, XL Group undertook some initiatives that should have a positive impact on earnings. The company's already strong inorganic growth profile was boosted further through the collaboration with Financial Risk Solutions, Inc. to provide Chill-Pro® contractual liability insurance coverage for Heating Ventilation and Air Conditioning (HVAC) contractors in the U.S.

Additionally, the company engaged in a number of product launches to enhance its portfolio. These include the introduction of an operational risk insurance solution and a commercial crime insurance policy in the U.S. along with the expansion of the data breach response specialists network. Also, increased buybacks should boost earnings per share.

However, significant exposure to catastrophe losses remains a concern. In fact, the company expects to incur a loss of $100 million from the Tianjin explosion in the third quarter. Also, increased expenses as well as a decline in investment income raise caution.

Earnings Whispers

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

Zacks ESP: XL Group has an ESP of -6.98%. This is because the Most Accurate estimate stands at 40 cents and the Zacks Consensus Estimate is pegged at 43 cents per share.

Zacks Rank: XL Group has a Zacks Rank #4 (Sell). We caution against Sell-rated stocks (Zacks Rank #4 and 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are three stocks from the finance sector which you may want to consider as our model shows that they have the right combination of elements to post an earnings beat this quarter:

Arch Capital Group Ltd. ACGL has an Earnings ESP of +4.26% and a Zacks Rank #2. The company is scheduled to release third-quarter earnings on Oct 28.

AXIS Capital Holdings Ltd. AXS has an Earnings ESP of +1.18% and a Zacks Rank #2. The company is likely to announce third-quarter earnings on Oct 27.

Assurant Inc. AIZ has an Earnings ESP of +3.27% and a Zacks Rank #3. The company will report third-quarter earnings on Oct 27.

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XL GROUP PLC (XL): Free Stock Analysis Report

ASSURANT INC (AIZ): Free Stock Analysis Report

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ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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