MetLife’s (NYSE:MET) second-quarter 2018 earnings release scheduled on Aug 1 is expected to showcase revenue growth on the back of sales growth in Asia and EMEA, growth in operating premiums plus fees and other revenues in its Group Benefits segment.
Another tailwind for MetLife’s earnings is the overall strength of the economy. Very low unemployment rate coupled with a higher labor force participation rate is a positive for the company’s U.S. Group Benefits business, which should have witnessed premium growth in the second quarter. However, Group Benefits’ adjusted earnings will be dampened by a lower investment margin and higher expenses, primarily due to technology investments supporting its growth initiatives.
Property & Casualty or P&C might have experienced a strong quarter, driven by favorable auto underwriting results. Auto results are likely to benefit from targeted rate increases and management action to create value.
The company’s 2018 effective tax rate is projected between 18% and 20%. It expects a vast majority of the tax benefit across its U.S. and MetLife Holdings segments.
The company is making investments in technological improvement. It anticipates initiative costs of roughly $330 million pretax in 2018 and plans to spend $1.0 billion by 2020. These costs will put pressure on margins before generating benefits and the effect of the same will be felt in the impending quarterly results.
Earnings Surprise History
The company boasts an attractive earnings surprise history. It beat estimates in each of the last four quarters with an average positive surprise of 9.96%. This is depicted in the chart below:
MetLife, Inc. Price and EPS Surprise
Here is what the quantitative model predicts:
Our proven model does not conclusively show that MetLife is likely to beat on earnings this quarter to be reported. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.
Earnings ESP: MetLife has an Earning ESP of -0.69%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: MetLife carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, the company needs to have a positive ESP to be confident about an earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.
Stocks That Warrant a Look
Here are some companies that you may consider as per our model, these have the right combination of elements to beat estimates this reporting cycle:
American Financial Group (NYSE:AFG) is expected to report second-quarter 2018 results on Aug 1. The company has an Earnings ESP of +1.68% and a Zacks Rank #2 (Buy).
XL Group (NYSE:XL) is expected to report second-quarter 2018 earnings results on Jul 31. The company has an Earnings ESP of +6.37% and a Zacks Rank of 3.
NMI Holdings (NASDAQ:NMIH) has an Earnings ESP of +1.54% and a Zacks Rank of 1 (Strong Buy). The company is expected to report second-quarter earnings results on Aug 1.
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