It has been about a month since the last earnings report for Marsh & McLennan (MMC). Shares have added about 8.8% 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 Q1 Earnings Beat, Rise Y/Y
Marsh & McLennan delivered first-quarter 2020 adjusted earnings per share of $1.64, surpassing the Zacks Consensus Estimate by 5.1% on the back of solid revenues. Moreover, the same increased 8% year over year.
Marsh & McLennan’s consolidated revenues of $4.7 billion were up 5% on an underlying basis. This upside is majorly attributable to the Risk and Insurances Services plus Consulting Segments. The top line missed the Zacks Consensus Estimate by 0.1%.
Total operating expenses of $3.6 billion in the first quarter were up 14.3% 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 $2.9 billion, up 5% on an underlying basis. Adjusted operating income rose 20% to $932 million from the prior-year quarter’s level.
Marsh, a unit within this segment, generated revenues of $2.1 billion, up 5% on an underlying basis. In U.S./Canada, underlying revenues rose 5% year over year.
Underlying revenue growth from international operations of 4% includes 6% increase of the metric in the Asia Pacific, 4% in EMEA and a 3% rise in Latin America.
Another unit under this segment, Guy Carpenter, displayed 7% revenue growth on an underlying basis in the quarter under review.
The Consulting segment's revenues inched up 3% on an underlying basis to $1.8 billion. Also, adjusted operating income dipped 1% to $289 million.
A unit within this segment, Mercer, generated revenues of $1.3 billion, up 5% on an underlying basis. Wealth’s revenues were up 3% on an underlying basis. Health and Career’s revenues were each up 8% and 2% year over year on an underlying basis.
Another unit, Oliver Wyman Group, registered revenues of $511 million, flat year over year on an underlying basis.
The company repaid $500 million of senior notes in the first quarter.
Marsh & McLennan exited the first quarter of 2020 with cash and cash equivalents of $1.5 billion, up 28.1% from the level at 2019 end.
Net cash used in operating activities totaled $638 million, up 131.2% year over year.
As of Mar 31, 2020, Marsh & McLennan’s total assets were $31.3 billion, up 0.1% from the figure as of Dec 31, 2019.
Total equity was $7.5 billion, down 6.2% from the level at 2019 end.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision. The consensus estimate has shifted -9.89% due to these changes.
At this time, Marsh & McLennan has a poor Growth Score of F, however its Momentum Score is doing a lot better with an A. However, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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. It's no surprise Marsh & McLennan has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.
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