Marsh & McLennan (MMC): What's Expected In Q3 Earnings?

Global insurance broker Marsh & McLennan Cos. Inc. (NYSE:MMC) is scheduled to release third-quarter 2016 financial results before the opening bell on Oct 25.

In the last reported quarter, the company reported in line with the estimates. Coming to earnings surprise, the company surpassed estimates in three out of last four reported quarters, with an average positive surprise of 2.45%. Let's see how things are shaping up for this announcement.

Factors at Play

Marsh & McLennan has been seeing revenue growth consecutively for the past 13 quarters by at least 3% and we expect the trend to continue in the third quarter. Revenue will see an upside from the company’s vast geographical footprint. Both its segments – Risk & Insurance Services and Consulting – are expected to see top-line growth.

Management had indicated earlier that underlying revenue from Oliver Wyman would decline due to comparisons to very strong growth in the Financial Services practice last year as well as global growth concerns flared up by the Brexit uncertainty.

Also, Marsh & McLennan’s earnings during the quarter are expected suffer from the prolonged period of low interest rates which will stress investment income.

Nevertheless, numerous strategic acquisitions made by the company in the recent past that have added clients will trigger top-line growth.

Moreover, disciplined expense management will likely lead to an improvement in margin.

The company’s efforts toward returning capital to shareholders through substantial share repurchase will also drive up the bottom line.

Earnings Whispers

Our proven model does not conclusively show that Marsh & McLennan is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy) or at least 2 (Buy) or 3 (Hold) for this to happen. But this is not the case here as elaborated below.

Zacks ESP: Marsh & McLennan’s Most Accurate estimate is pegged at 69 cents per share, which is in line with the Zacks Consensus Estimate. The Earnings ESP is thus 0.00%.

Zacks Rank: Marsh & McLennan has a Zacks Rank #4 (Sell). Note that we caution against stocks with a Zacks Rank #4 or 5 (Sell rated) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

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

MasterCard Incorporated (NYSE:MA) which is slated to report third-quarter earnings on Oct 26. The company has an Earnings ESP of +1.02% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

MarketAxess Holdings, Inc. (NASDAQ:MKTX) with an Earnings ESP of +1.30% and a Zacks Rank #3. The company is slated to report third-quarter earnings on Oct 26.

Visa Inc. (NYSE:V) with an Earnings ESP of +1.37% and a Zacks Rank #3. The company is slated to report fiscal fourth -quarter earnings (for the quarter ending Sep 30, 2016) on Oct 24.

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