KBW Upgrades Marsh & McLennan To Outperform

• Marsh & McLennan Companies, Inc (NYSE: MMC) shares were volatile in 2015 and are down 7 percent in the last one year.
• Keefe Bruyette & Woods’ Quentin McMillan upgraded the rating for the company from Market Perform to Outperform, while reducing the price target from $62 to $61.
• Marsh & McLennan’s current share price does not fully value the expected EPS CAGR and the company’s strong commitment to capital management, McMillan believes.

Analyst Quentin McMillan mentioned that Marsh & McLennan is a core portfolio holding for financial investors, given its leading franchises in risk and consulting. He added that the company’s current share price does not fully reflect the expected 13 percent EPS CAGR through 2018 and strong commitment to capital management.

“We see MMC as a defensive, sustainable, double-digit EPS growth story, with 3-4% organic growth, ~90bps of margin expansion annually, and capital deployment (~4% buyback annually plus 1-2% growth from M&A) driving a 13% EPS CAGR through 2018e,” the Keefe Bruyette & Woods report mentioned.

McMillan expects the company to drive investor returns through mergers and acquisitions, share repurchases and dividends. Marsh & McLennan has already set capital goals to increase cash flows, reduce share count and grow dividends by around 10 percent annually.

Marsh & McLennan Agency [MMA] has completed nearly 50 acquisitions since 2009 and has higher margins and growth than the rest of Marsh Risk & Insurance Services [RIS]. McMillan expects the company to benefit from growth in MMA and the higher profit profile associated with writing small and medium sized businesses.