Marsh & McLennan Companies, Inc. (MMC Quick QuoteMMC - Free Report) is set to report third-quarter 2024 results on Oct. 17, 2024, before the opening bell. The Zacks Consensus Estimate for the to-be-reported quarter’s earnings is currently pegged at $1.61 per shareon revenues of $5.7 billion. 

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The third-quarter earnings estimate has witnessed downward revisions over the past 60 days. However, the bottom-line projection indicates a year-over-year increase of 2.6%. The Zacks Consensus Estimate for quarterly revenues suggests year-over-year growth of 5.9%.

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Marsh & McLennan has a robust history of surpassing earnings estimates, beating the consensus estimate in each of the last four quarters, with the average surprise being 5.8%.

Q3 Earnings Whispers for MMC

Our proven model predicts a likely earnings beat for the company this time around as well. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the odds of an earnings beat. That’s precisely the case here.

MMC has an Earnings ESP of +0.38% and a Zacks Rank #3.

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What’s Shaping MMC’s Q3 Results?

The third-quarter top-line performance of Marsh & McLennan is likely to have been boosted by strong performance in its Risk and Insurance Services, as well as Consulting segments. The Risk and Insurance Services segment is expected to have gained on the back of solid contributions from its Marsh and Guy Carpenter sub-divisions. MMC's performance in the third quarter is likely to have received a significant boost from robust operations in the international market, with a particular focus on the EMEA region.

The Zacks Consensus Estimate for revenues from the Risk and Insurance Services segment indicates a rise of 6.6% from the prior-year quarter, whereas our estimate suggests a 6.2% jump. Also, the consensus mark for the segment’s adjusted operating income suggests a more than 14% increase from the prior-year quarter’s figure of $671 million.

The Consulting segment of Marsh & McLennan is anticipated to have benefited from its Oliver Wyman sub-unit performance in the third quarter. Also, improving returns from Wealth and Health operations are likely to have aided the Mercer (another sub-unit of the Consulting segment) business in the to-be-reported quarter. 

The Zacks Consensus Estimate for revenues of the Mercer sub-division indicates a 4.2% increase from the prior-year quarter’s level of $1.42 billion, while the same for the Oliver Wyman business' revenues indicates 6% growth. 

The Zacks Consensus Estimate for the overall Consulting segment’s revenues indicates growth of 4.6% from the prior-year quarter’s $2.2 billion, whereas our estimate for the metric suggests a 4.9% rise. Also, the consensus mark for the segment’s adjusted operating income is pegged at $461.4 million, suggesting 3.2% growth from the year-ago quarter’s reported number.

The factors stated above are expected to have positioned the company for not only a year-over-year improvement in the third quarter but also a likely earnings beat. However, the positives are anticipated to be partially offset by increasing expenses. Our estimate for total operating expenses in the quarter under review suggests a 3.8% year-over-year jump.

MMC’s Price Performance & Valuation

Marsh & McLennan's stock has gained 20.1% year to date, underperforming the industry’s growth of 32.6%. Some of its peers like Aon plc (AON Quick QuoteAON - Free Report) and Arthur J. Gallagher & Co. (AJG Quick QuoteAJG - Free Report) have risen 23.2% and 28.9%, respectively, during this time. MMC stock has lagged the S&P 500 Index, which has rallied 21.9% during the same period.

MMC’s YTD Price Performance

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Now, let’s look at the value Marsh & McLennan offers investors at current levels.

Although the company’s share price has underperformed compared to the industry, its valuation appears relatively stretched when measured against industry averages. Currently, MMC is trading at 24.49X forward 12 months earnings, above its five-year median of 22.92X and the industry’s average of 22.19X.

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Assessing Marsh & McLennan’s Prospects

Marsh & McLennan’s operating performance continues to benefit from its diversified product portfolio, extensive geographic presence, and strong client retention. Long-term growth is supported by commercial insurance rate increases, digital capability enhancements, and expansion into new business areas. The company's strategic acquisitions across its various operating segments allow it to enter new regions, deepen existing market penetration and develop new units. However, rising operational expenses, particularly due to increased compensation and benefits, present a significant challenge. Additionally, its increasing debt and the broader impact of geopolitical tensions are key headwinds. As competition within the insurance brokerage industry intensifies, MMC may face pressure on margins, making it challenging to sustain its growth momentum and retain clients effectively.

Final Words

Although MMC’s long-term outlook remains promising, it might not be the right time to buy just yet. Current investors can hold on to their stocks and benefit from its growth initiatives. However, prospective buyers may consider waiting for a more favorable entry point due to the stock's elevated valuation and keep an eye on its upcoming earnings.