Shares of Marsh & McLennan Companies, Inc. MMC scaled a fresh 52-week high of $106.45 on Nov 18, before closing the day at $106.24. Impressive earnings performance in the third quarter and strategic initiatives contributed to this rally.
Year to date, this Zacks Rank #3 (Hold) company has gained 33.2%, outperforming the industry’s growth of 31.7%.
The stock has also performed better than other companies in the same space, such as Willis Towers Watson Public Limited Company WLTW, Arthur J. Gallagher & Co. AJG and Blue Capital Reinsurance Holdings Ltd. BCRH. Willis Towers Watson, Arthur J. Gallagher and Blue Capital Reinsurance have gained 23.7%, 24.5% and 27.3%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Let’s delve deeper and analyze the factors responsible for the stock’s upsurge.
Marsh & McLennan delivered an encouraging performance in the third quarter with earnings of 77 cents beating the Zacks Consensus Estimate by 11.6% on the back of higher revenues. This better-than-expected performance was driven by top-line growth, which in turn, rose 5% on an underlying basis. The company witnessed strong performances by its Risk and Insurances Services plus Consulting Segments.
Investor confidence was won by the company’s ability to deliver a solid top line. This uptick has been driven by diverse product offerings, a wide geographic footprint and solid client retention. A number of acquisitions made over the past many years, significant capital expenditures undertaken for growth, launch of products and services, enhancements of digital capabilities and branching out into new businesses will further fuel the company's growth.
The company’s strategic buyouts paved the path for primary growth. The numerous purchases made within its different operating units enabled it to penetrate new geographies, expand within the existing ones, foray into new businesses, develop new segments and specialize within the current operations. Its February acquisition of Jardine Lloyd Thompson is expected to expand its capabilities going forward.
Marsh & McLennan has maintained a strong balance sheet and financial flexibility including consistent cash flow generation for the past many years. Its disciplined capital management through share buyback and dividend payments cemented investors’ trust in the stock. In May 2019, its board of directors hiked its quarterly cash dividend by 10%. This shareholder-friendly measure further reflects the company’s sturdy liquidity and it not only retains the existing investors’ optimism but also attracts new ones.
Going forward, the company will likely witness solid growth on the back of its strategic initiatives and capital position. This, in turn, is expected to drive the share price further.
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