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A month has gone by since the last earnings report for Marsh & McLennan (MMC). Shares have added about 5.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Marsh & McLennan 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's Q4 Earnings Surpass, In Line Y/Y
Marsh & McLennan delivered fourth-quarter 2020 adjusted earnings per share of $1.19, surpassing the Zacks Consensus Estimate of $1.14 by 4.4% on a solid contribution from its Risk and Insurance Services segment. Meanwhile, the bottom line was flat with the year-ago quarter.
Marsh & McLennan’s consolidated revenues of $4.4 billion were up 4% year over year. Moreover, the top line beat the Zacks Consensus Estimate by 3.7% on the back of its strong Risk and Insurance Services segment.
Total operating expenses of $3.8 billion in the fourth quarter were up 4.7% year over year due to higher compensation and benefits.
Quarterly Segmental Results
Risk and Insurance Services
Revenues at this segment were $2.5 billion, up 3% on an underlying basis. Adjusted operating income decreased 5% to $525 million from the prior-year quarter’s level.
Marsh, a unit within this segment, generated revenues of $2.4 billion, up 4% on an underlying basis. In the U.S./Canada, underlying revenues rose 7% year over year. Underlying revenues from international operations were flat year over year including a 1% increase of the same in the Asia Pacific, a 3% rise in Latin America and a 2% drop in EMEA. Revenues from another unit under this segment, Guy Carpenter, were up 5% year over year on an underlying basis in the quarter under review.
Revenues were down 1% on an underlying basis to $1.9 billion. Also, adjusted operating income were up 8% to $387 million.
A unit within this segment, Mercer, generated revenues of $1.3 billion, down 3% on an underlying basis. Wealth’s revenues dipped 1% on an underlying basis. Health and Career’s revenues were down 2% and 7%, respectively, year over year on an underlying basis. Another unit Oliver Wyman Group registered revenues of $590 million, up 4% year over year on an underlying basis.
Marsh & McLennan exited the fourth quarter with cash and cash equivalents of $2.1 billion, up 80.9% % from the level at 2019 end. Net cash provided by operating activities totaled $3.3 billion at the end of the fourth quarter, up 43.2% year over year.
As of Dec 31, 2020, Marsh & McLennan’s total assets were $33 billion, up 5.3% from the figure as of Dec 31, 2019. Total equity was $9.2 billion, up 16.6% from the level at 2019 end.
For 2020, revenues of the company were $17.2 billion, up 1% on an underlying basis. Adjusted earnings per share for last year were up 7% year over year to $4.97.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
Currently, Marsh & McLennan has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Following the exact same course, 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.
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Marsh & McLennan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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