BMO Capital Markets has adjusted its price target on shares of Marsh & McLennan (NYSE: MMC), a global professional services firm offering clients advice and solutions in risk, strategy, and people.
The price target was increased to $228.00 from the previous $217.00. Despite this change, the firm maintained its Market Perform rating on the stock.
The adjustment follows BMO Capital's revision of its earnings per share (EPS) estimates for Marsh & McLennan for the fourth quarter of 2024 and the full years of 2025 and 2026. The forecasts were reduced by 11%, 5%, and 7%, respectively.
The lowered expectations are primarily attributed to anticipated declines in margins for the company's Risk & Insurance and Consulting segments, in addition to a projected higher tax rate.
However, BMO Capital's analyst noted that their adjusted operating income estimates for Marsh & McLennan remain aligned with consensus for the fourth quarter of 2024 and are approximately 2% higher for the full years of 2025 and 2026. This suggests that while earnings may be under pressure, the firm's operating performance could be more resilient than initially expected.
In other recent news, Marsh & McLennan reported a 5% rise in underlying revenue and a 12% increase in adjusted operating income for Q3 2024. The company also announced an adjusted EPS of $1.63, a 4% increase year-over-year, and consolidated revenue of $5.7 billion.
In a significant expansion, Marsh & McLennan acquired McGriff Insurance Services for $7.75 billion, a deal expected to close by the end of the year. The acquisition is anticipated to be modestly accretive to earnings in the first year, with increased accretion from the second year forward. RBC Capital maintained a Sector Perform rating on Marsh & McLennan, while Goldman Sachs maintained its Sell rating.
Both firms adjusted their earnings estimates for the company, with RBC Capital increasing its price target to $242.00 and Goldman Sachs holding firm at $220.00.
InvestingPro Insights
To complement the analysis provided by BMO Capital Markets, recent data from InvestingPro offers additional context on Marsh & McLennan's financial position and market performance. The company currently boasts a market capitalization of $109.06 billion, reflecting its significant presence in the insurance industry.
Marsh & McLennan's P/E ratio stands at 27.18, which aligns with the BMO analyst's observation of potential pressure on earnings. This valuation metric should be considered in light of the company's revenue growth, which was 7.84% over the last twelve months as of Q3 2024.
InvestingPro Tips highlight Marsh & McLennan's strong dividend history, having raised its dividend for 15 consecutive years and maintained payments for 54 years. This track record of consistent shareholder returns could provide some stability amidst the projected margin declines in key segments.
It's worth noting that while BMO Capital adjusted its EPS estimates downward, Marsh & McLennan has demonstrated solid profitability, with a gross profit margin of 45.24% and an operating income margin of 27.21% over the last twelve months. These figures suggest the company maintains robust operational efficiency despite challenges.
For investors seeking a more comprehensive analysis, InvestingPro offers 11 additional tips on Marsh & McLennan, which could provide further insights into the company's financial health and market position.
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