Marsh & McLennan Cos.
) witnessed an outlook upgrade from Standard & Poor's Ratings
Services (S&P), which reflected the company's steady
operating growth and strong risk profile. However, the long-term
credit rating remained at "BBB-".
Accordingly, S&P lifted its outlook on Marsh &
McLennan to 'positive' from 'stable' based on its improved
operating leverage that is projected to accelerate in 2014 and
beyond. The strategy of expansion through acquisitions and
diversified product portfolio is also bearing fruit, while
improving the client base. Alongside, a strong capital and cash
flow position boosts liquidity and financial flexibility, thereby
eliminating any significant risk on financial leverage.
Marsh & McLennan's consistent efforts to tap cross-selling
opportunities, maintain cost discipline and improve pricing
initiatives have enhanced new business production and retention
rates in both the broking and consulting businesses.
Consequently, the company has been enjoying a dominant market
position, gaining strong competitive edge in the peer group.
On this growth curve, S&P believes that the company is
modestly attuned to achieve organic growth of low- to mid-single
digit for 2013 and EBITDA margins of around 20%, excluding any
litigation or restructuring charges, in both 2013 and 2014.
Previously in 2010, S&P had lowered its outlook on Marsh
& McLennan to 'negative' from 'stable' based on its $500
million litigation settlement, which was raised back to stable in
Nov 2011. However, these past three years, the company has shown
a steady and modest improvement in its organic and inorganic
growth, thereby sailing through the recent economic turmoil
While sluggish macro-economic factors and antitrust litigation
charges could act as growth dampeners, S&P believes that
Marsh & McLennan has a strong potential to outperform its
peers in the future, banking on its size, diverse product
offering, global presence and technical expertise.
While Marsh & McLennan carries a Zacks Rank #3 (Hold),
other outperformers of the financial sector include
Validus Holdings Ltd.
Willis Group Holdings Public Ltd. Co.
). All these stocks carry a Zacks Rank #2 (Buy).
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MARSH &MCLENNAN (MMC): Free Stock Analysis
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