On Nov 18, 2016, the stock of Marsh & McLennan Companies, Inc. (MMC - Free Report) climbed to a 52-week high of $69.43. The upside is believed to have been driven by a profitable third quarter reported last month as well as some recent announcements made by the company relating to acquisitions and an increase in share buyback.
Over the past 52-weeks, the stock has gained 25% compared with a rise of just 4.7% in the S&P 500 index over the same period.
Investors favorably viewed the company’s third-quarter results. Earnings of 69 cents per share came in line with the Zacks Consensus Estimate and increased 10% year over year. Also, revenues of $3.1 billion increased 1% year over year, led by revenue growth at both its segments – Risk and Insurance Services and Consulting.
The quality of earnings was strong as evident by an improvement in the underlying margins, despite volatility in commodity prices and foreign exchange, declining interest rates, weak global GDP growth, political instability, and lower property and casualty insurance pricing.
MARSH & MCLENNAN Price and Consensus
The stock must also have received a boost from the recent acquisition announcements. Earlier during the month, Marsh, the wholly owned subsidiary of the company inked a deal to acquire Bluefin Insurance Group Limited, a unit of AXA Group. Marsh intends to combine Bluefin and Jelf acquired last year – into a single business unit.
The latest acquisition and the subsequent integration with Jelf will enable Marsh to serve over 250,000 clients in 80 locations. The new unit is expected to become one of the leading insurance brokers for mid-size and SME companies in the U.K.
Also, last month, the company acquired Vero Insurance, Inc., renowned for its exceptional insurance products and signature personal service to high net worth individuals, families and small businesses.
The company’s inorganic growth instills investors’ confidence in the stock. Since 2009, the company has invested over $7 billion in growth and efficiency. This includes over 120 acquisitions approaching $5 billion, capital expenditures of $2.4 billion and the addition of over 10,000 colleagues. Moreover, its investments are broad based and covers geographic expansion, segmentation, and new capabilities and innovation that bode well for the long term.
Its capital management via consistent share buyback and dividend payment also must have helped it to gain investors’ favor. Earlier this month, the company announced an increase in the company’s share repurchase program to up to $2.5 billion. Also, the company’s expectation to deliver on its annual capital return commitments by reducing its share count and increasing dividend by double digits, must have worked well for the stock.
Marsh & McLennan carries a Zacks Rank #3 (Hold).
Investors may consider players like Alleghany Corp. (Y - Free Report) , Arch Capital Group Ltd. (ACGL - Free Report) and NMI Holdings, Inc. (NMIH - Free Report) . Each of these stocks carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here
Alleghany delivered positive surprises in three of the last four quarters, with an average beat of 20.52%.
Arch Capital beat expectations in each of the last four quarters, with an average beat of 9.27%.
NMI Holdings delivered positive surprises in each of the last four quarters, with an average beat of 62.8%.