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Marsh & McLennan (MMC) Up 6.7% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for Marsh & McLennan Companies, Inc.MMC . Shares have added about 6.7% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Marsh & McLennan (MMC) Surpasses Q4 Earnings Estimates

Marsh & McLennan Companies reported fourth-quarter 2016 operating earnings per share of 89 cents, surpassing the Zacks Consensus Estimate of 84 cents per share. Earnings improved 25% year over year.

The quarter witnessed margin expansion in both Risk and Insurance Services and Consulting segments.

Quarterly Details

Marsh & McLennan's consolidated revenues were $3.4 billion, up 1% or 3% on an underlying basis, year over year. Revenues came in line with the Zacks Consensus Estimate.

Total operating expenses of $2.73 billion decreased slightly from $2.74 billion in the year-ago quarter.

Segment Results

Revenues from the Risk and Insurance Services segment were $1.8 billion, up 5% on an underlying basis. However, adjusted operating income increased 15% year over year to $421 million.

A unit within this segment - Marsh - reported evenues of $1.6 billion, up 5% on an underlying basis. Underlying revenues grew 5% year over year in international operations, reflecting 7% growth in Latin America, 4% in Asia Pacific, 5% in EMEA (Europe, the Middle East and Africa) and 4% in the U.S.-Canada region.

Another unit Guy Carpenter's revenues came in at $222 million, up 3% year over year on an underlying basis.

The Consulting segment's revenues decreased 2% year over year on an underlying basis to $1.6 billion. Additionally, adjusted operating income increased 13% year over year to $299 million.

A unit within this segment - Mercer reportedevenues of $1.1 billion, up 1% on an underlying basis.

Another unit, Oliver Wyman Group's revenue was $486 million, an increase of 4% on an underlying basis.

Financial Update

Marsh & McLennan exited the quarter with cash and cash equivalents of $1.1 billion, down from from $1.4 billion at year-end 2015.

As of Dec 31, 2016, Marsh & McLennan's total assets were $18.2 billion, almost unchanged year over year.

Total equity was $6.3 billion, down from $6.6 billion at year-end 2015.

Capital Deployment

Marsh & McLennan bought back 2.6 million shares for $175 million during the quarter.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter compared to two lower. While looking back an additional 30 days, we can see even more upward momentum. There have been three upward revisions in the last two months.

Marsh & McLennan Companies, Inc. Price and Consensus

Marsh & McLennan Companies, Inc. Price and Consensus | Marsh & McLennan Companies, Inc. Quote

VGM Scores

At this time, Marsh & McLennan's stock has an strong Growth Score of 'A', while its Momentum is lagging a bit with 'C'. Charting a exactly similar path, the stock was allocated a grade of 'C' on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of 'B'. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is more suitable for growth investors than momentum and value investors.

Outlook

While estimates have been broadly trending upward for the stock, the magnitude of these revisions has been net zero. Notably, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.

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


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

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