On Oct 7, 2013, we reiterated our recommendation on
Marsh & McLennan Cos. Ltd.
) at Neutral based on its steady operating growth, partially
offset by competitive pressure and increased international
Why the Retention?
Estimates for Marsh & McLennan have remained steady since
the company reported its second-quarter 2013 results on Aug 7.
The company's earnings per share of 72 cents exceeded the Zacks
Consensus Estimate by 5.9%, but revenues of $3.09 billion lagged
the same benchmark by 1.9%.
However, both the top and bottom line surpassed the year-ago
results by 2% and 20%, respectively. The robust performance was
based on modest revenue growth across its Risk and Insurance
business along with strict expense control, which also drove the
operating margin. These positives were, at the same time,
partially offset by weakness in the Oliver Wyman segment and
higher tax expense.
Following the release of the second-quarter results, the Zacks
Consensus Estimate for 2013 edged up 1.6% to $2.48 per share in
the last 60 days. Meanwhile, the Zacks Consensus Estimate for
2014 remained intact at $2.73 a share. With the Zacks Consensus
estimates for both 2013 and 2014 showing no clear directional
pressure on the stock in the near term, the company now has a
Zacks Rank #3 (Hold).
Intense global competition coupled with increased integration
risks related to acquisitions as well as litigation compliances
and currency fluctuations deter the desired upside within Marsh
& McLennan. However, the company's growth is sustained by its
improved cross-selling opportunities, new business production and
high retention rates from its diversified business mix.
Additionally, meaningful international exposure and pricing power
boosts the operating leverage.
Moreover, the 9% hike in dividends and accelerated share
buybacks, in Aug 2013, reflect superior liquidity and a risk-free
balance sheet, overall boosting the confidence of both investors
and the ratings agencies.
Other Financial Stocks That Warrant a Look
Along with Marsh & McLennan, other stocks in the financial
sector that are outperforming include
). All these stocks carry a Zacks Rank #2 (Buy).
AON PLC (AON): Free Stock Analysis Report
MARSH &MCLENNAN (MMC): Free Stock Analysis
VISA INC-A (V): Free Stock Analysis Report
XOOM CORP (XOOM): Free Stock Analysis Report
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