Marsh & McLennan (MMC)
sees its business firming even in a soft global economy, a theme analysts following the consulting giant find room to agree on. Its share price has trended up over the past few months before dipping sharply in the May sell-off, and its dividend yield is currently 2.87 percent.
Marsh & McLennan is a global professional services firm providing advice and solutions in the areas of risk, strategy and human capital. It is the parent company of a number of risk experts and specialty consultants, including Marsh, the insurance broker, intermediary and risk advisor; Guy Carpenter, the risk and reinsurance specialist; Mercer, the provider of HR and related financial advice and services; and Oliver Wyman Group, the management and economic consultancy.
The firm has more than 52,000 employees worldwide and annual revenue exceeding $11.5 billion, Marsh & McLennan provides analysis, advice and transactional capabilities to clients in more than 100 countries.
The company conducts business through two segments: risk and insurance services includes risk management activities (risk advice, risk transfer and risk control and mitigation solutions) as well as insurance and reinsurance broking and services. That business is conducted through Marsh and Guy Carpenter.
Secondly, consulting includes human resource consulting and related outsourcing and investment services and specialized management and economic consulting services. That business is conducted through Mercer and Oliver Wyman Group.
“Our strong first quarter results are a terrific start to the year. Across all our businesses, we saw revenue growth and higher levels of profitability,” Marsh & McLennan CEO Brian Duperreault told analysts in a recent earnings call.
“Underlying revenue growth of 6 percent, combined with ongoing control of expenses, resulted in growth of 12 percent in adjusted operating income and 13 percent growth in adjusted earnings per share. This performance is consistent with our long-term plan to produce double-digit earnings growth.”
Marsh & McLennan has a market cap of $17.71 billion in a sector, insurance, where the average company size is $12.29 billion. Its trailing 12-month P/E ratio is 18.01 and its five-year projected price-to-earnings-growth (PEG) ratio is 1.51, compared to 3.51 for the sector.
Its projected earnings per share growth for the coming year is 13.49 percent, compared to a sector average of 8.08 percent.
Liquidity and leverage
Analysts are generally positive on MMC, with buy or outperform calls from Sandler O’Neill, Keefe Bruyette & Woods, Citigroup Investment Research, Raymond James, Morgan Stanley, and Deutsche Bank.
JP Morgan rates the stock a sell.
“Fundamentally, the company continues to experience decent liquidity and leverage as a result of its well-executed restructuring initiatives and maintaining low capital requirements, thereby supporting efficient capital deployment. Even the consulting business is improving, primarily spurred by the recent global acquisitions that are generating new clients,” Zacks Investment Research analysts said in a recent report on MMC, setting the target price at $36.
“Results should benefit from improved pricing and other macro factors although pension costs could continue to restrict margin expansion in the near term.”
Marsh & McLennan next reports on Aug. 1.
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