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Will Revenue Growth Aid Marsh & McLennan (MMC) Q3 Earnings?

Marsh & McLennan Companies, Inc. MMC third-quarter results, scheduled for Oct 26, are expected to benefit from increased revenues at both its operating segments, namely Risk and Insurance Services and Consulting.

Revenues in the company’s Risk and Insurance Services segment, which contributes nearly 55% to total revenues, have been growing for the past several quarters and we expect the trend to continue in the quarter. Top-line growth will be aided by an increase in underlying revenues along with accretion from numerous acquisitions made during the course of the past many years. The Zacks Consensus Estimate for revenues for the segment is $1.7 billion, up 6.3% year over year.

Also, higher contribution is expected from Consulting. A combination of organic and inorganic growth measures are likely to drive revenues in this segment. The Zacks Consensus Estimate for revenues for the segment is $1.6 billion, up 5.8% year over year.

The company is expanding in underpenetrated regions such as Latin America, Asia, the Middle East and South Africa, which are perceived as high growth areas. Performance from these regions is likely to aid overall results.

Along with pushing into attractive geographical regions, the company is expanding in new businesses which should drive revenues. These include Marsh’s build out of MMA and its UK SME strategy, the emergence of cyber, flood and mortgage practices at Marsh and Guy Carpenter, investments at Mercer in Workday implementation capabilities, global health and benefits technology and the Mercer Marketplace Health Exchange, investments in Oliver Wyman and their digital technology and analytics platform, and continued pursuit of high-growth areas, including healthcare and the public sector.

Here is what our quantitative model predicts:

Our proven model shows that Marsh & McLennan does not have the right combination of the two key ingredients, of a positive Earnings ESP and a Zacks Rank #3 (Hold) or better, to beat earnings estimates.

Zacks ESP:  Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is -0.53%. This is because the Most Accurate estimate of 77 cents per share is a penny below the Zacks Consensus Estimate. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Though Marsh & McLennan carries a Zacks Rank #2 (Buy), which increases the predictive power of ESP, its negative ESP makes surprise prediction difficult.

We caution against Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Marsh & McLennan Companies, Inc. Price and EPS Surprise

Other Stocks

Here are some companies worth considering as our model shows that these possess the right combination of elements to beat estimates this quarter:  

Amerisafe Inc. AMSF will report third-quarter 2017 earnings results on Oct 25. The company has an Earnings ESP of +3.04% and carries a Zacks Rank #3. You can see">the complete list of today’s Zacks #1 Rank stocks here.

Anthem Inc. ANTM has an Earnings ESP of +1.55% and a Zacks Rank of 3. The company is scheduled to report third-quarter earnings results on Oct 25.

Aflac Inc. AFL has an Earnings ESP of +1.31%. This Zacks #3 Ranked company is scheduled to report third-quarter earnings results on Oct 25.

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