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On Jul 22, we reiterated our recommendation on Marsh & McLennan Cos. Ltd. (MMC - Analyst Report) at Neutral based on its superior inorganic growth strategy and expense management. However, intense competition and soft performance within the Consulting segment were partial offsets.

Why the Retention?

Estimates for Marsh & McLennan have remained steady since the company reported its first-quarter 2013 results on May 2. The company’s earnings of 73 cents per share exceeded the Zacks Consensus Estimate of 70 cents, although revenues of $3.13 billion lagged the same by 2.2%.

However, both earnings per share and revenues outpaced the year-ago quarter numbers, based on strict expense control that dipped 0.2% along with 5% revenue growth across Risk and Insurance Services business. The upsides were partly offset by higher tax expense coupled with weak revenue growth in the Consulting segment.

Following the release of the second-quarter results, the Zacks Consensus Estimate for 2013 remained intact at $2.43 per share in the last 60 days. However, the Zacks Consensus Estimate for 2014 inched down a penny to $2.71 a share. With the Zacks Consensus Estimate for both 2013 and 2014 showing slight downward pressure on the stock in the near term, the company now has a Zacks Rank #4 (Sell).

While intense global competition coupled with sluggish interest rate environment and currency fluctuations deter the desired upside in the stock, Marsh & McLennan’s growth is sustained by its diverse product offering, global presence and technical expertise. Disciplined expense management and other cost-saving initiatives also support growth in margins.

Moreover, strong inorganic growth through acquisitions, primarily in the emerging markets bode well for long-term growth. The regular dividend payouts and accelerated share buybacks further reflect superior liquidity, which scores well with the ratings agencies and raises investor confidence.

Other Financial Stocks That Warrant a Look

While we remain on the sidelines for Marsh & McLennan, other stocks in the insurance sector that are outperforming include Hilltop Holdings Inc. (HTH - Analyst Report), ProAssuarnce Corp. (PRA - Analyst Report) and AmTrust Financial Services Inc. (AFSI - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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