On Jul 22, we reiterated our recommendation on
Marsh & McLennan Cos. Ltd.
) at Neutral based on its superior inorganic growth strategy and
expense management. However, intense competition and soft
performance within the Consulting segment were partial
Why the Retention?
Estimates for Marsh & McLennan have remained steady since
the company reported its first-quarter 2013 results on May 2. The
company's earnings of 73 cents per share exceeded the Zacks
Consensus Estimate of 70 cents, although revenues of $3.13
billion lagged the same by 2.2%.
However, both earnings per share and revenues outpaced the
year-ago quarter numbers, based on strict expense control that
dipped 0.2% along with 5% revenue growth across Risk and
Insurance Services business. The upsides were partly offset by
higher tax expense coupled with weak revenue growth in the
Following the release of the second-quarter results, the Zacks
Consensus Estimate for 2013 remained intact at $2.43 per share in
the last 60 days. However, the Zacks Consensus Estimate for 2014
inched down a penny to $2.71 a share. With the Zacks Consensus
Estimate for both 2013 and 2014 showing slight downward pressure
on the stock in the near term, the company now has a Zacks Rank
While intense global competition coupled with sluggish
interest rate environment and currency fluctuations deter the
desired upside in the stock, Marsh & McLennan's growth is
sustained by its diverse product offering, global presence and
technical expertise. Disciplined expense management and other
cost-saving initiatives also support growth in margins.
Moreover, strong inorganic growth through acquisitions,
primarily in the emerging markets bode well for long-term growth.
The regular dividend payouts and accelerated share buybacks
further reflect superior liquidity, which scores well with the
ratings agencies and raises investor confidence.
Other Financial Stocks That Warrant a Look
While we remain on the sidelines for Marsh & McLennan,
other stocks in the insurance sector that are outperforming
Hilltop Holdings Inc.
AmTrust Financial Services Inc.
). All these stocks carry a Zacks Rank #1 (Strong Buy).
AMTRUST FIN SVC (AFSI): Free Stock Analysis
HILLTOP HLDGS (HTH): Free Stock Analysis
MARSH &MCLENNAN (MMC): Free Stock Analysis
PROASSURANCE CP (PRA): Free Stock Analysis
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