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Marsh & McLennan (MMC) Q4 Earnings: Surprise in Store?

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Global insurance broker Marsh & McLennan Companies, Inc.MMC is scheduled to release fourth-quarter 2015 financial results before the opening bell on Feb 4, 2016.

In the last reported quarter, the company posted a positive earnings surprise of 5%. Let's see how things are shaping up for this announcement.

Factors at Play

Marsh & McLennan's results are being impacted significantly by the strength of the U.S. dollar against major currencies, especially the Euro. In the second half of 2015, the dollar remained strong against the Canadian and Australian dollar, and the currencies of most emerging markets. At the beginning of the year, the company had estimated the negative impact to 2015 earnings per share (EPS) from foreign exchange at approximately 15 cents, the highest level in the company'shistory. During the third quarter, the estimated full-year impact was revised to 18 cents per share. Of this, 6 cents was incurred in the first quarter, 4 cents in the second, 3 cents in the third and now the company projects 5 cents impact per share in the fourth quarter.

Also, Marsh & McLennan's earnings during the fourth quarter may suffer from a prolonged period of low interest rates and benign loss activity causing price declines that will in turn put pressure on its underwriting margins and return on equity.

Earnings at the company's Guy Carpenter unit will suffer from tough reinsurance market conditions.

Nevertheless, numerous strategic acquisitions made by the company in the recent past have resulted in new client generation that should trigger growth in the quarter to be reported.

Moreover, modest performance across the insurance and consulting businesses, along with disciplined expense management will expectedly drive margin growth.

Earnings Whispers

Our proven model does not conclusively show that Marsh & McLennan is likely to beat the Zacks Consensus Estimate in the fourth 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 70 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 #2. 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 companies you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Aspen Insurance Holdings Ltd. AHL with Earnings ESP of +7.97% and a Zacks Rank #3. The company is scheduled to release fourth-quarter earnings results on Feb 4.

PartnerRe Ltd. PRE with an Earnings ESP of +8.94% and a Zacks Rank #1. The company is scheduled to release fourth-quarter earnings results on Feb 8.

Arch Capital Group Ltd. ACGL with an Earnings ESP of +1.85% and a Zacks Rank #3. The company is scheduled to release fourth-quarter earnings results on Feb 9.

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MARSH &MCLENNAN (MMC): Free Stock Analysis Report

PARTNERRE LTD (PRE): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

ASPEN INS HLDGS (AHL): 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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