The second-quarter earnings season is well underway, with financial results from 25% of the S&P 500 index already on board. Earnings of these 126 index members (accounting for 32.7% of the index's total market capitalization) have declined 1.1% on 2.6% lower revenues as per the Earnings Preview report. However, the beat ratio is 70.6% for the bottom line and 55.6% for the top line.
Total earnings of 35.6% of the companies in the Finance sector that have already reported their results have declined 5.1%, while revenues are also down 0.7%. Nonetheless, the beat ratios (75% for earnings and 59.4% for revenues) compare favorably with the S&P 500.
Insurance brokers are part of the broader Finance sector. Overall, top line is expected to have benefited from widened global presence, diversified portfolio and strategic acquisitions. Investment income is likely to improve slightly amid a still low investment rate environment.
However, escalating expenses are likely to weigh on margin expansion. Also, adverse foreign exchange might have restricted the desired upside. Intensified competition is also a dampener.
INSURANCE-BROKERS Industry Price Index
As many as 951 companies are due to report their quarterly results this week, including 189 S&P 500 members. Among these, let's see what's in store for four insurance brokers that are reporting on Jul 28.
Marsh & McLennan Companies, IncMMC is a global professional services firm providing risk and insurance services, risk consulting, and employee benefits consulting services to clients worldwide. The company delivered a 3.73% positive earnings surprise last quarter. Marsh & McLennan has an Earnings ESP of negative 1.10% as the Most Accurate estimate stands at 9 cents and the Zacks Consensus Estimate is pegged higher at 91 cents. The stock has a Zacks Rank #3 (Hold). The company will report second-quarter earnings on Jul 28.
While revenues will see an upside from the company's vast geographical footprint, numerous strategic acquisitions made by the company in the recent past that have resulted in a new generation of clients will trigger growth. Disciplined expense management should drive margins. However, Marsh & McLennan's results are being impacted significantly by the strength of the U.S. dollar against other major currencies. Also, Marsh & McLennan's earnings may suffer from the prolonged period of low interest rates and benign loss activity. (Read more: Marsh & McLennan: What's in Store for Q2 Earnings? )
With respect to the surprise trend, Marsh & McLennan surpassed expectations in three of the last four quarters, with an average beat of 2.45%.
MARSH &MCLENNAN Price and EPS Surprise
Arthur J. Gallagher & CoAJG provides insurance brokerage and consulting services and third-party claims settlement and administration services in the United States and internationally. The company delivered a 17.24% positive earnings surprise last quarter. For the second quarter, Arthur J. Gallagher has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are both pegged at 96 cents. The stock has a Zacks Rank #3 (Hold).
Owing to robust domestic and international operations, Arthur J Gallagher is likely to witness revenue growth in both its brokerage and risk management segments. However, Arthur J Gallagher's total expenses are likely to have increased, primarily due to higher compensation and operating expenses. Further, the company might witness an increase in interest expenses, which in turn, might limit margin expansion. (Read: Arthur J Gallagher Q2 Earnings: A Surprise in Store? )
With respect to the surprise trend, Arthur J. Gallagher surpassed expectations in three of the last four quarters, with an average beat of 8.31%.
GALLAGHER ARTHU Price and EPS Surprise
eHealth, IncEHTH is a leading online source of health insurance for individuals, families and small businesses. The company delivered a 194.1% positive earnings surprise last quarter. For the second quarter, eHealth has an Earnings ESP of 0.00% as the Most Accurate estimate and the Zacks Consensus Estimate are pegged at a breakeven. The stock has a Zacks Rank #2 (Buy).
With respect to the surprise trend, eHealth surpassed expectations in two of the last four quarters, with an average beat of 253.1%.
EHEALTH INC Price and EPS Surprise
Erie Indemnity CompanyERIE is mainly engaged in the management of affairs for Erie Insurance Exchange. The company also participates in property/casualty insurance business. The company delivered a 4.71% positive earnings surprise last quarter. For the second quarter, Marsh & McLennan has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate stand at $1.04. The stock has a Zacks Rank #4 (Sell).
With respect to the surprise trend, Erie Indemnity missed expectations in two of the last four quarters, with an average miss of 7.20%.
ERIE INDEMNITY Price and EPS Surprise
Keep an eye on our full earnings articles to see how these companies finally fared.
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