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What's in Store for Marsh & McLennan (MMC) Q4 Earnings?

Zacks Equity Research

Marsh & McLennan Companies, Inc. MMC will release fourth-quarter 2018 results on Jan 31, before the market opens. In the last reported quarter, the company delivered a positive earnings surprise of 4%, backed by higher segmental revenues.

Let’s see, how things are shaping up prior to this announcement.

The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $1.03, down 1.9% year over year. Marsh & McLennan’s impending results are likely to suffer due to weak performances by its Oliver Wyman and Guy Carpenter units.

The Zacks Consensus Estimate for net operating revenues in the to-be-reported quarter is pegged at $3.7 billion, reflecting 0.9% year-over-year growth.

The Risk and Insurance Services segment has likely suffered in the quarter under review due to Guy Carpenter. The consensus estimate for this segment’s revenues stands at $1.9 billion, down 0.7% year over year. However, its Marsh unit is likely to contribute to its overall revenues, evident from the consensus mark of $1.8 billion, up 6.1% year over year. The company’s constant efforts in alliances and acquisitions poise the segment well for growth.

The Consulting segment has also been aiding the company’s revenue base over the last few quarters and is expected to maintain the trend in the fourth quarter as well. The Zacks Consensus Estimate  for revenues from this segment stands at $1.7 billion, up 4.7% year over year.  

Marsh & McLennan anticipated the contribution from fourth-quarter investment income to be immaterial. It also projected foreign exchange as a headwind to revenues as well as net operating income in the fourth quarter.

The company has likely continued with capital deployment through share repurchase and dividend.

However, its total debt is likely to rise/pile up in the fourth quarter of 2018, given its constant growth-related investments.

What the Quantitative Model States

Our proven model indicates that Marsh & McLennan is not likely to beat on earnings this quarter to be reported. This is because the stock does not have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Marsh & McLennan has an Earnings ESP of -1.33% as the Most Accurate Estimate of 1.02 is pegged lower than the Zacks Consensus Estimate of 1.03. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Marsh & McLennan Companies, Inc. Price and EPS Surprise

Marsh & McLennan Companies, Inc. Price and EPS Surprise | Marsh & McLennan Companies, Inc. Quote

Zacks Rank: Marsh & McLennan carries a Zacks Rank #3, which increases the predictive power of ESP. However, chances of an earnings beat are slim here with a negative ESP as only a positive ESP can make a company confident about a likely earnings surprise. Thus, this combination leaves surprise prediction inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the finance sector with the perfect mix of elements to surpass estimates in the next releases are as follows:

BofI Holding, Inc. AX is set to report fourth-quarter earnings on Jan 29. The stock has a Zacks Rank of 3 and an Earnings ESP of +5.22%.You can see the complete list of today’s Zacks #1 Rank stocks here.

Cboe Global Markets, Inc. CBOE has an Earnings ESP of +1.93%. This Zacks Rank #2 company is scheduled to release fourth-quarter earnings on Feb 2.

Brown & Brown, Inc. BRO is slated to announce fourth-quarter earnings on Jan 28. The stock has an Earnings ESP of +5.38% and a Zacks Rank of 2.

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