In a performance that would make Mr. Toad’s Wild Ride seem tame in comparison, Marsh & McLennan (MMC) has experienced volatility to the extreme over the last 6 months. After reaching its high of just under $37 for the past year in late September, MMC slid to close the year at under $24.
Since January 1st, the company’s stock has been subject to some of the wildest swings in price for any stock so far this year.
After dropping over 15% in value in the first 8 trading days of the year, the stock recovered a good portion of the earlier loss, only to slide precipitously and give up an additional 20% after declaring its dividend in late January.
This week the stock surrendered another 10 percent in market value and reached a new 52 week low before rallying on the company’s earnings report.
Investors were apparently pleased that the earnings report wasn’t as bad as expected.
Marsh & McLennan is a worldwide consulting firm providing professional advice and solution services in the areas of risk assessment, strategic management and human capital.
The company through its component companies from time to time acts as an insurance broker, an intermediary, a risk advisor, a reinsurance specialist and a human resource provider, depending on the customers’ needs.
The company has 56,000 employees in 20 countries. With revenues of over $11.5 billion, Marsh & McLennan is the largest consulting firm of its type in the United States.
The economic slowdown has not had an appreciable impact on the company. Earnings for the fourth quarter of 2008 reached $.037 per share exclusive of non-recurring charges exceeding analysts’ consensus expectations by $.03.
Marsh & McLennan has a very healthy balance sheet. With nearly $5 billion in current assets, the company’s current ratio is over 1.5 and the long term debt to equity ratio is less than half the company’s equity. Dividend yield for MMC is over 4% at the current stock price.
The condition of the world economy is likely to increase the demand for the services of Marsh & McLennan. Companies facing massive restructuring needs are likely to increasingly turn to outside resources for assistance in reorganizing and will outsource many company functions in order to convert fixed costs into variable expenses.
Risk management will also be a critical need of companies engaged in global activities which increase exposure to personal and property damage. Marsh & McLennan as the world leader in risk assessment and insurance brokerage stands to benefit from the need to protect assets.