On Friday, Goldman Sachs (NYSE:GS) updated its stance on Marsh & McLennan Companies, Inc. (NYSE:MMC), slightly increasing the price target to $207 from $206, while continuing to recommend a Sell rating on the stock. The firm's analyst cited the company's execution on its full-year 2024 guidance, which includes mid-single-digit organic growth, margin expansion, and strong growth in adjusted earnings per share (EPS).
Marsh & McLennan's second-quarter 2024 results were reportedly in line with expectations, reinforcing the company's ability to meet its financial targets for the year. Despite this, the analyst expressed skepticism over the broader market's consensus estimates, suggesting they may be overly optimistic given the upcoming challenges in organic growth and margin comparisons.
The analyst pointed out that Marsh & McLennan could face pressure on margins in the second half of 2024 due to a decrease in fiduciary investment income and tougher margin comparisons in its Consulting segment. This includes the impact from Mercer (NASDAQ:MERC)'s significant organic growth in the third quarter of 2023.
Even with an estimated benefit from restructuring cost savings, achieving the company's margin expansion goals for the latter half of 2024 is seen as a tough task.
The updated price target reflects a modest 1% increase and anticipates a negative 3% total return. The analyst's estimates for the company's organic growth remain unchanged, predicting a deceleration to 5% in the second half of 2024. Furthermore, the analyst's EPS projections for 2024 to 2026 are 3% below the Visible Alpha Consensus Data, primarily due to a lower adjusted operating margin expectation.
In other recent news, Marsh & McLennan reported an adjusted earnings per share of $2.41, slightly exceeding the consensus estimate of $2.40. The company's underlying revenue growth was recorded at 6%, aligning with both the consensus and Roth/MKM's forecasts. Following these results, Roth/MKM raised the company's price target from $200 to $220, maintaining a Neutral rating.
The company has also been active in expanding its operations through acquisitions. Marsh & McLennan recently acquired Minnesota-based AmeriStar Agency and New Jersey-based Hudson (NYSE:HUD) Shore Group, although the financial terms of these deals remain undisclosed.
Additionally, the company announced plans to acquire UK and Dutch pension specialist Cardano, which would add approximately $66 billion in assets under management to Mercer's wealth management services, subject to regulatory approval.
RBC Capital has also raised Marsh & McLennan's stock target to $228, maintaining a Sector Perform rating, following a meeting with the company's CFO and investor relations team. The company's strong performance and future growth trends were discussed during the meeting.
However, Marsh & McLennan has disclosed an upcoming blackout period for its employee benefit plans due to administrative changes in the company's 401(k) Savings and Investment Plan. The blackout period is scheduled to commence on July 26, 2024, and is expected to conclude by the week of August 12, 2024.
InvestingPro Insights
Marsh & McLennan Companies, Inc. (NYSE:MMC) has demonstrated a commendable track record of financial stability and investor return, as highlighted by the InvestingPro Tips. Notably, MMC has raised its dividend for 14 consecutive years and has maintained dividend payments for 54 years, showcasing a long-term commitment to shareholder value. Additionally, analysts predict the company will be profitable this year, a sentiment backed by its profitability over the last twelve months. These factors are particularly relevant for investors seeking stable, dividend-paying stocks.
From a valuation standpoint, InvestingPro Data indicates that MMC is trading at a high P/E ratio of 27.39, and its Price / Book ratio stands at 8.64, which may suggest the stock is priced at a premium relative to its book value. Moreover, the company's market capitalization is a robust 107.3 billion USD, reflecting its significant presence in the market. Revenue growth also remains strong, with a 10.38% increase over the last twelve months as of Q1 2024, indicating healthy business performance.
For investors interested in deeper analysis and additional insights, there are more InvestingPro Tips available, which can be accessed by visiting the dedicated page for MMC on the InvestingPro platform. By using the coupon code PRONEWS24, readers can get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of investment data and expert analysis to inform their investment decisions.
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