Marsh & McLennan Held at Neutral - Analyst Blog


On Oct 7, 2013, we reiterated our recommendation on Marsh & McLennan Cos. Ltd. ( MMC ) at Neutral based on its steady operating growth, partially offset by competitive pressure and increased international dependence.

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 Aon Plc ( AON ), Visa Inc. ( V ) and XOOM Corp. ( XOOM ). All these stocks carry a Zacks Rank #2 (Buy).

AON PLC (AON): Free Stock Analysis Report

MARSH &MCLENNAN (MMC): Free Stock Analysis Report

VISA INC-A (V): Free Stock Analysis Report

XOOM CORP (XOOM): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AON , MMC , V , XOOM

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