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Here's Why You Should Stay Away From Marsh & McLennan (MMC)
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Marsh & McLennan Companies, Inc. (MMC - Free Report) has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $4.62 per share has moved 7.8% south over the past 60 days, indicative of analysts’ bearish sentiment on the stock.
So, what could be the reasons for this pessimistic stance?
The company now has a much smaller private equity portfolio and its investment income has been deteriorating over the past few years. It reported a net investment loss of $2 million in the first quarter of 2020 versus the net investment income of $5 million in the first quarter of 2019.
Moreover, the current challenging interest rate environment continues to pose a threat to the company.
Marsh & McLennan has been facing exorbitant operating expenses over the past many years. In the first quarter, the same rose 14.3% year over year due to higher compensation and benefits as well as other operating costs. A persistent escalation of expenses might weigh on the company’s margins.
Additionally, the company is exposed to unfavorable forex volatility due to its presence in more than 130 countries. Per its last earnings call, management expected an adverse forex to induce a headwind of 86 cents per share for the remaining year.
Withdrawal of its outlook for 2020 due to the current unpredictable scenario raises concern. It expects a decline in the underlying revenues due to the coronavirus outbreak. Also, the company anticipates Guy Carpenter to witness a soft second half in 2020 despite expecting a strong first half. It also forecasts a fall in Mercer segment’s underlying revenues. Moreover, management expects Oliver Wyman to see muted revenues in the second and the third quarter.
Its lack of financial flexibility also bothers. The company saw its long-term debt level increase from $2.6 billion to $10.7 billion during the 2013-2019 period. Total debt of the company accounts for 60.1% (compared with 57.5% as of Dec 31, 2019) of its capital, higher than the industry average of 55.2%. As of Mar 31, 2020, the company had cash and cash equivalents worth $1.5 billion and a $1.8-billion credit facility of which $800 million remained unused at the end of the first quarter. It even added a $1-billion line of credit to its borrowing capacity. However, total available cash and credit facilities are lower than its total debt load of $11.2 billion. The company’s next debt maturities are in December 2020 and January 2021.
The company's 2020 earnings estimate stands at $4.62 per share, implying a downside of 0.9% from the year-ago reported figure.
Shares of this Zacks Rank #4 (Sell) company have lost 2.6% year to date, narrower than its industry's decline of 5.4%.
The price performance looks lacklustre when compared with other companies’ stock returns in the same space, such as eHealth, Inc. (EHTH - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Arthur J. Gallagher Co. (AJG - Free Report) , which have gained 12.4%, 6.8% and 4.2%, respectively. While eHealth sports a Zacks Rank #1 (Strong Buy), Arthur J. Gallagher has a Zacks Rank #3 (Hold) and Brown & Brown carries the same Zacks Rank as Marsh & McLennan.
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain. Click Here, See It Free >>
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Here's Why You Should Stay Away From Marsh & McLennan (MMC)
Marsh & McLennan Companies, Inc. (MMC - Free Report) has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $4.62 per share has moved 7.8% south over the past 60 days, indicative of analysts’ bearish sentiment on the stock.
So, what could be the reasons for this pessimistic stance?
The company now has a much smaller private equity portfolio and its investment income has been deteriorating over the past few years. It reported a net investment loss of $2 million in the first quarter of 2020 versus the net investment income of $5 million in the first quarter of 2019.
Moreover, the current challenging interest rate environment continues to pose a threat to the company.
Marsh & McLennan has been facing exorbitant operating expenses over the past many years. In the first quarter, the same rose 14.3% year over year due to higher compensation and benefits as well as other operating costs. A persistent escalation of expenses might weigh on the company’s margins.
Additionally, the company is exposed to unfavorable forex volatility due to its presence in more than 130 countries. Per its last earnings call, management expected an adverse forex to induce a headwind of 86 cents per share for the remaining year.
Withdrawal of its outlook for 2020 due to the current unpredictable scenario raises concern. It expects a decline in the underlying revenues due to the coronavirus outbreak. Also, the company anticipates Guy Carpenter to witness a soft second half in 2020 despite expecting a strong first half. It also forecasts a fall in Mercer segment’s underlying revenues. Moreover, management expects Oliver Wyman to see muted revenues in the second and the third quarter.
Its lack of financial flexibility also bothers. The company saw its long-term debt level increase from $2.6 billion to $10.7 billion during the 2013-2019 period. Total debt of the company accounts for 60.1% (compared with 57.5% as of Dec 31, 2019) of its capital, higher than the industry average of 55.2%. As of Mar 31, 2020, the company had cash and cash equivalents worth $1.5 billion and a $1.8-billion credit facility of which $800 million remained unused at the end of the first quarter. It even added a $1-billion line of credit to its borrowing capacity. However, total available cash and credit facilities are lower than its total debt load of $11.2 billion. The company’s next debt maturities are in December 2020 and January 2021.
The company's 2020 earnings estimate stands at $4.62 per share, implying a downside of 0.9% from the year-ago reported figure.
Shares of this Zacks Rank #4 (Sell) company have lost 2.6% year to date, narrower than its industry's decline of 5.4%.
The price performance looks lacklustre when compared with other companies’ stock returns in the same space, such as eHealth, Inc. (EHTH - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Arthur J. Gallagher Co. (AJG - Free Report) , which have gained 12.4%, 6.8% and 4.2%, respectively. While eHealth sports a Zacks Rank #1 (Strong Buy), Arthur J. Gallagher has a Zacks Rank #3 (Hold) and Brown & Brown carries the same Zacks Rank as Marsh & McLennan.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Zacks’ Single Best Pick to Double
From thousands of stocks, 5 Zacks experts each picked their favorite to gain +100% or more in months to come. From those 5, Zacks Director of Research, Sheraz Mian hand-picks one to have the most explosive upside of all.
This young company’s gigantic growth was hidden by low-volume trading, then cut short by the coronavirus. But its digital products stand out in a region where the internet economy has tripled since 2015 and looks to triple again by 2025.
Its stock price is already starting to resume its upward arc. The sky’s the limit! And the earlier you get in, the greater your potential gain.
Click Here, See It Free >>