Global multi-line insurer - MetLife Inc. ( MET ) is scheduled to release its first-quarter 2014 financial results after the closing bell on Apr 30.
In the last reported fourth-quarter 2013, the company delivered a positive earnings surprise of 5.4%, while the four-quarter trailing average beat is pegged at 6.5%. Let's see how things are shaping up for this announcement.
Factors that Seek Attention
The announcement of dividend hike along with retention of stable financial ratings appears to have failed to gather any momentum just ahead of the earnings release. Moreover, the risk of being acknowledged as a systemically important financial institution (SIFI) could again put MetLife under the Federal Reserve's supervision and further pose hindrances in the completion of the previously targeted share repurchases.
Hence, the long-term outlook also appears cautious amid challenging interest rates, currency fluctuations, higher competition and regulatory challenges. Along with sluggish investment returns, a significant decline in variable annuities in the last couple of years have taken a toll on the financials, with further sales reduction expected in 2014 as well.
Nonetheless, a modest financial leverage of below 30% is consistent with the maintenance of a capital position that remains sturdiest in the industry. MetLife is also cushioned by a diversified portfolio mix and a leading brand.
Alongside, fundamental growth is shaping up with consistent focus on international growth. The company's international revenue share shored up from 14% of the total in 2010 to about 24% in 2013. The recent Provida acquisition will likely inflate the company's operating earnings contribution from emerging markets to 17% from current 14%. Further, the company is on track to achieve $600 million in net pre-tax expense savings from technology efficiencies by 2015.
Our proven model shows that MetLife is unlikely to beat earnings as it lacks the required combination of two key ingredients.
Zacks ESP : MetLife has a negative Zacks ESP. That is because Expected Surprise Prediction or Earnings ESP , which represents the difference between the Most Accurate estimate of $1.38 per share and the Zacks Consensus Estimate of $1.40, is -1.43%.
Zacks Rank : MetLife has a Zacks Rank #4 (Sell). Note that stocks with Zacks Rank #1, 2 and 3 have significantly higher chances of beating earnings. Sell-rated stocks (#4 and 5) are kept under the radar and are never considered going into the earnings announcement.
The combination of MetLife's Zacks Rank #4 and -1.43% ESP deter us from being confident of an earnings beat on Apr 30.
Other Stocks to Consider
Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this coming quarter:
Everest Re Group Ltd. ( RE ) ,earnings ESP of +7.85% and a Zacks Rank #1 (Strong Buy).
RenaissanceRe Holdings Ltd. ( RNR ), earnings ESP of +3.15% and a Zacks Rank #1.
American International Group Inc. ( AIG ), earnings ESP of +0.9% and a Zacks Rank #3 (Hold).