A month has gone by since the last earnings report for Marsh & McLennan (MMC - Free Report) . Shares have added about 4.7% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Marsh & McLennan’s Q3 Earnings Surpass, Decline Y/Y
Marsh & McLennan Companies delivered third-quarter 2019 adjusted earnings per share of 77 cents, surpassing the Zacks Consensus Estimate by 11.6% on the back of solid revenues. However, the same dipped 1.3% year over year.
Marsh & McLennan’s consolidated revenues of $4 billion were up 5% on an underlying basis. This upside is majorly attributable to the Risk and Insurances Services plus Consulting Segments. However, the top line missed the Zacks Consensus Estimate by 0.8%.
Total operating expenses of $3.5 billion in the third quarter were up 18.2% year over year due to higher compensation and benefits as well as other operating expenses.
Quarterly Segmental Results
Risk and Insurance Services
Revenues at the Risk and Insurance Services segment were $2.2 billion, up 6% on an underlying basis. Adjusted operating income increased 11% to $313 million from the prior-year quarter’s level.
Marsh, a unit within this segment generated revenues of $1.9 billion, up 5% on an underlying basis. In U.S./Canada, underlying revenues rose 6%.
Underlying revenue growth from international operations of 3% includes 7% increase of the metric in Asia Pacific, 2% rise in the EMEA and a 1% dip in Latin America.
Another unit under this segment, which is Guy Carpenter, displayed 11% revenue growth on an underlying basis.
The Consulting segment's revenues improved 4% on an underlying basis to $1.8 billion. Also, adjusted operating income increased 9% year over year to $320 million.
A unit within this segment, Mercer, reported revenues of $1.3 billion, up 3% on an underlying basis. Wealth’s revenues were flat on an underlying basis.
Another unit Oliver Wyman Group registered revenues of $505 million, up 7% on an underlying basis.
Share Repurchase Update
The company bought back shares worth $200 million in the quarter under review.
Marsh & McLennan exited the third quarter with cash and cash equivalents of nearly $1.2 billion, up 13.8% from the figure at 2018 end.
In the third quarter, the company repaid $300 million of senior notes. Cash flow from operations for the first nine months of 2019 totaled $1.3 billion, down 2.1% year over year.
As of Sep 30, 2019, Marsh & McLennan’s total assets were $31.1 billion, up 44.1% from the figure as of Dec 31, 2018.
Total equity was $7.8 billion, up 2.8% from the level at 2018 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
At this time, Marsh & McLennan has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Marsh & McLennan has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.