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Can Marsh & McLennan (MMC) Q3 Earnings Pull a Surprise?

Global insurance broker Marsh & McLennan Cos. Inc.MMC is scheduled to release third-quarter 2015 financial results before the opening bell on Oct 27.

In the last reported quarter, the company's earnings were in line with the estimates. Let's see how things are shaping up for this announcement.

Factors at Play

Marsh & McLennan's earnings during the quarter will suffer from a prolonged period of low interest rates and benign loss activity that led to price declines. These will put pressure on its underwriting margins and ROEs.

Earnings from Marsh & McLennan's Guy Carpenter will suffer from a tough reinsurance market.

Moreover, a stronger U.S. dollar might dent Marsh & McLennan's revenues as it did in the last quarter.

At the second quarter's earnings conference call the company had said that based on the current FX and interest rates, macro headwinds might negatively impact EPS by approximately $0.32 in 2015, an increase from its earlier estimate of $0.30. Part of this earnings decline will be witnessed in the third quarter.

Nevertheless, numerous strategic acquisitions made by Marsh & McLennan in the recent past resulted in the generation of new clients, triggering growth the quarter to be reported.

Moreover, modest performance across insurance and consulting businesses along with disciplined expense management drove margins in the last reported quarter, and is expected to do so in the third quarter as well.

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 60 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 #3. Though a favorable Zacks Rank increases the predictive power of ESP, the company's ESP of 0.00% leaves our prediction inconclusive.

Stocks to Consider

Here are some other companies you may want to consider as these 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 will report third-quarter earnings on Oct 28, 2015.

The Allstate Corporation ALL has an Earnings ESP of +1.5% and a Zacks Rank #3. The company will report third-quarter earnings on Nov 2, 2015.

RenaissanceRe Holdings Ltd. RNR has an Earnings ESP of +3.68% and a Zacks Rank #2. The company will report third-quarter earnings on Nov 4.

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RENAISSANCERE (RNR): Free Stock Analysis Report

ALLSTATE CORP (ALL): Free Stock Analysis Report

MARSH &MCLENNAN (MMC): Free Stock Analysis Report

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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