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Shares of Marsh & McLennan to reach $75 in medium term

Marsh & McLennan (MMC), a US-based multinational professional services firm, continues on its inorganic growth path with fresh acquisitions. Recently, the company announced that its unit Mercer had acquired Sirota Consulting, a global provider of employee engagement solutions that offers the full breadth of organizational assessments, surveys, technology, and analytics. The acquisition builds upon Mercer’s consulting strength and capabilities in talent management and reinforces its commitment to employee engagement. Earlier, the company also said about the acquisition of Benefits Resource Group, an employee benefits consulting firm that offers a wide range of medical, life, and disability insurance services to midsize employers in Ohio. With this deal, Marsh & McLennan should enhance its employee benefits presence and leadership in the Ohio market.

To note, Marsh & McLennan regularly undertakes strategic acquisitions, which enhances its growth profile and boosts investors’ confidence in the stock. Moreover, its investments are broad based and includes geographic expansion, segmentation, and new capabilities and innovations. These poise the company for long-term growth, I believe.

Marsh & McLennan’s financials for the third quarter of 2016 were decent. Consolidated revenues increased 0.6% y-o-y to $3.14 bn while adjusted operating income jumped 15.6% to $562 mn, with operating margin expanding 240 basis points to 18%. Adjusted earnings per share grew 9.5% to 69 cents matching analysts’ average projection. During the reported quarter, Marsh & McLennan bought back 3 mn shares for $200 mn bringing the nine-month tally to $625 mn. A quarterly dividend of 34 cents per share offers a healthy dividend yield of 2%.

Shares of Marsh & McLennan, I believe, will continue to rise, with medium-term target at $75.