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MetLife (MET) Q1 Earnings to Buoy on Revenue Growth

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MetLife Inc. (MET - Free Report) first-quarter 2018 earnings scheduled on May 2, is expected to showcase an increase in revenues on the back of sales growth in Asia and EMEA, growth in operating premiums, and fees and other revenues in its Group Benefits segment.

As a large investor in the U.S. fixed income market, MetLife should have benefited from economic growth that has led to higher interest rates.

Property & Casualty, or P&C, had a strong quarter as adjusted earnings, excluding notable items, doubled year over year, driven by favorable auto underwriting results. Auto results may benefit from targeted rate increases and management action to create value.

However, earnings in Retirement and Income Solutions should be pressured by the flatter yield curve.

The company’s 2018 effective tax rate expectation is between 18% and 20%, lower than its prior guidance of 23% to 25%, should aid its margins.

The company is making investments in technological improvement. The company expects initiative costs of roughly $330 million pre-tax in 2018, and plans to invest $1.0 billion by 2020. These costs will put pressure on margins before generating benefits, and the effect of the same will be seen in the first quarter.

Earnings Surprise History

The company boasts an attractive earnings surprise history. It beat estimates in each of the last four reported quarters, with an average positive surprise of 9.6%. This is depicted in the chart below:

MetLife, Inc. Price and EPS Surprise

Here is what our quantitative model predicts:

Our proven model does not conclusively show that MetLife is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a favorable Zacks Rank #1, 2 or 3 for this to happen. But that is not the case here as you will see below.

Zacks ESP: MetLife has an Earning ESP of -0.06%. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: MetLife carries a Zacks Rank #3 (Hold), which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

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

Stocks to Consider

Here are some companies from the insurance sector that you may want to consider as these have the right combination of elements to beat on earnings this quarter:

American Financial Group, Inc. (AFG - Free Report) is expected to report first-quarter 2018 earnings results on May 2. The company has an Earnings ESP of +4.46% and a Zacks Rank #2 (Buy). 

You can see the complete list of today’s Zacks #1 Rank stocks here.

National General Holdings Corp (NGHC - Free Report) is expected to report first-quarter 2018 earnings results on May 7. The company has an Earnings ESP of +5.59% and a Zacks Rank #1.

American Equity Investment Life Holding Company (AEL - Free Report) has an Earnings ESP of +5.99% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 2.

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