Compelling Reasons to Hold on to Marsh & McLennan (MMC) Stock
Marsh & McLennan Companies, Inc. MMC is well-poised for growth on the back of sustained revenue increase, new business growth, frequent acquisitions and a commendable financial position.
Zacks Rank & Price Rally
Marsh & McLennan currently carries a Zacks Rank #3 (Hold).
The stock has gained 30.4% in the past year compared with the industry’s 25.6% rise. The Zacks Finance sector and the S&P 500 composite have rallied 26.4% and 29.4%, respectively, in the said time frame.
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Robust Growth Prospects
The Zacks Consensus Estimate for Marsh & McLennan’s 2024 earnings is pegged at $8.56 per share, indicating an 7.1% increase from the 2023 reported figure. The same for revenues is $24.2 billion, implying 6.5% growth from the prior-year number.
The consensus estimate for 2025 earnings is pegged at $9.33 per share, suggesting 8.9% growth from the 2024 estimate. The same for revenues is $25.5 billion, which indicates a rise of 5.5% from the prior-year estimate.
Robust Earnings Surprise History
MMC boasts an impressive surprise history. Its earnings outpaced estimates in each of the trailing four quarters, the average surprise being 6.45%.
Solid Return on Equity
The return on equity for Marsh & McLennan is currently 33.7%, which is higher than the industry’s average of 31.4%. The figure substantiates the company’s efficiency in utilizing shareholders’ funds.
Business Tailwinds
Revenues of Marsh & McLennan continue to benefit on the back of solid contributions from the Risk and Insurance Services and, Consulting segments. Its revenues have consistently grown since 2010 except for in 2015. Management expects to generate mid-single-digit or higher underlying revenue growth in 2024.
New business growth, higher renewal rates, and improved insurance and reinsurance rates coupled with a growing global economy drive the Risk and Insurance Services segment, which accounted for around 62% of MMC’s overall top line in 2023. The unit closed nine acquisitions last year, among which the Honan Insurance Group and Graham Company buyouts were the largest ones.
Meanwhile, the Consulting unit, contributing roughly 38% to the consolidated revenues in 2023, is aided by a sustained demand for health, wealth and career solutions, and consulting services. It completed five buyouts last year.
Marsh & McLennan follows an active inorganic growth strategy throughout the year. MMC makes frequent acquisitions within its different operating units that enable it to delve deep into new regions, solidify its presence within the existing ones, venture into new businesses and specialize within its existing businesses. It expended $976 million and $572 million on acquisitions in 2023 and 2022, respectively.
Some of the recent buyouts made by its operating units include the outsourced chief investment officer (“OCIO”) business of Vanguard, a leading investment management firm, and two middle-market agencies of Louisiana, Querbes & Nelson (“Q&N”) and Louisiana Companies. Vanguard’s OCIO business was purchased by Mercer, a unit within the Consulting segment. Q&N and Louisiana Companies were acquired by a division of MMC’s Marsh business, Marsh McLennan Agency. To streamline operations, Oliver Wyman, a part of the Consulting unit, divested its Atlas Software business to Stoch Analytics.
A solid financial position is a dire need to maintain an active acquisition spree and other growth-related initiatives. Marsh & McLennan boasts solid cash reserves and robust cash-generating abilities. It generated operating cash flows of $4.3 billion in 2023, which climbed 22.9% year over year. An impressive financial stand also enables MMC to return value to shareholders through share buybacks and dividend payments. MMC has been hiking dividends for 14 straight years. Its dividend yield of 1.4% remains higher than the industry average of 1.1%.
Stocks to Consider
Some better-ranked stocks in the insurance space are CNO Financial Group, Inc. CNO, Erie Indemnity Company ERIE and Assurant, Inc. AIZ. CNO Financial sports a Zacks Rank #1 (Strong Buy), and Erie Indemnity and Assurant carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
CNO Financial’s earnings surpassed the Zacks Consensus Estimate in two of the last four quarters and missed the mark twice, the average beat being 3.62%. The consensus estimate for CNO’s 2024 earnings suggests an improvement of 2.6% from the year-ago reported figure.
The consensus mark for CNO’s 2024 earnings has moved 2.9% north in the past 30 days. Shares of CNO Financial have gained 22.2% in the past year.
Erie Indemnity’s earnings surpassed estimates in three of the last four quarters and missed the mark once, the average surprise being 11.24%. The Zacks Consensus Estimate for ERIE’s 2024 earnings indicates a 18.3% rise, while the same for revenues suggests an improvement of 11.4% from the respective prior-year reported figures.
The consensus mark for ERIE’s 2024 earnings has moved 2.4% north in the past 30 days. Shares of Erie Indemnity have surged 79% in the past year.
Assurant’s earnings outpaced estimates in each of the trailing four quarters, the average surprise being 42.15%. The Zacks Consensus Estimate for AIZ’s 2024 earnings indicates a 3.4% rise, while the same for revenues suggests an improvement of 4.1% from the respective prior-year reported figures.
The consensus mark for AIZ’s 2024 earnings has moved up 1.4% in the past 30 days. Shares of Assurant have gained 62.8% in the past year.
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CNO Financial Group, Inc. (CNO) : Free Stock Analysis Report
Assurant, Inc. (AIZ) : Free Stock Analysis Report
Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
Erie Indemnity Company (ERIE) : Free Stock Analysis Report
