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Why Should You Hold Marsh & McLennan (MMC) in Your Portfolio?

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Marsh & McLennan Companies, Inc. (MMC - Free Report) has been showing a consistent operating performance over the past many quarters. Its strategic initiatives drove business expansion and it remained in investor's good books on the back of its growing top line and solid 2021 guidance.

Over the past 60 days, the stock has witnessed its 2021 earnings estimate move 1.9% north.

Marsh & McLennan’s trailing 12-month return on equity (ROE) reinforces its growth potential. The company’s 30% ROE betters its industry average of 27.6%, reflecting its efficiency in utilizing its shareholders’ funds.

It retained investors' favorable sentiments by maintaining its beat streak in all the last four quarters, the average being 9%.

The company’s series of acquisitions contributed to its growth trajectory. It made numerous purchases within its different operating units that enabled it to enter new geographical regions, expand within the existing ones, foray into new businesses, develop new segments and specialize within its existing businesses.

Its JLT integration is expected to achieve around $425 million in savings. The year 2020 has been a record period for MMA with regard to acquired revenues since its establishment in 2009.

Further, in January 2021, MMA bought Compass Financial Partners, a Greensboro, NC-based retirement consulting and investment advisory company.

Moreover, the fourth quarter marked the 13th consecutive quarter of rate increases in the commercial PNC insurance marketplace.

The company remains well-poised for growth on the back of its resilience in business and robust demand for its services. It expects to deliver underlying revenue growth in the 3-5% range during 2021.

Marsh & McLennan’s operating performance has been favorable for the past many years, driven by its diverse product offerings, a wide geographic footprint and strong client retention. Its revenues have been increasing consistently since 2010 (except in 2015, which saw a mere 0.4% revenue dip). The trend continued in 2020 as well when its revenues were up 3% (1% on an underlying basis), courtesy of a strong Risk and Insurances Services Segment.

We expect the same to continue on the back of its expansion and product and service launches besides enhancements in digital capabilities.

The company has maintained a strong balance sheet and financial flexibility including consistent cash flow generation for the past many years. It ended 2020 with $2.1 billion cash.

In July 2020, its board of directors hiked its quarterly cash dividend by 2.2%, reflecting the 11th consecutive year of dividend increase at Marsh & McLennan. Its current dividend yield of 1.6% is higher than the industry average of 1.3%. The company plans to recommence share buybacks this year.

However, the company’s operating expenses escalated over the last several years due to higher compensation and benefits. A persistent elevation of expenses might weigh on its margins.

For 2021, its earnings estimate stands at $5.31, indicating an upside of 6.8% from the year-ago reported figure.

Zacks Rank and Price Performance

Shares of Marsh & McLennan, which currently carries a Zacks Rank #3 (Hold), have gained 50.8% over the past year compared with the industry’s growth of 44.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.



The company’s peers, namely Arthur J. Gallagher & Co. (AJG - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Aon plc (AON - Free Report) have also rallied 87.4%, 33.6% and 49.5%, respectively, in the same time frame.

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