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Willis Towers (WLTW) Q3 Earnings: Is a Beat in the Cards?

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We expect Willis Towers Watson Public Limited Company to surpass expectations in third-quarter 2018 results on Nov 2, before the market opens. Last reported quarter, the company delivered a positive earnings surprise of 1.80%.

Why a Likely Positive Surprise?

Our proven model clearly shows that Willis Towers has the right combination of the following two key ingredients to beat estimates this earnings season.

Earnings ESP: Willis Towers has an Earnings ESP of +3.91%. This is because the Most Accurate Estimate is pegged at $1.15, higher than the Zacks Consensus Estimate of $1.11. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Willis Towers has a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 along with a positive Earnings ESP have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

Willis Towers is likely to report top-line growth in the to-be-reported quarter, primarily driven by a probable increase in new business as well as solid customer retention levels. Also, better-than-expected segmental revenues might have contributed to this possible improvement. The Zacks Consensus Estimate for the metric in the third quarter of 2018 is pegged at $1.9 billion, reflecting a year-over-year rise of 0.9%.

Moreover, the insurance broker has likely witnessed higher commissions and fees in the yet-to-be-reported quarter on the back of anticipated organic growth across its business lines, expanded footprint and contributions from strategic acquisitions.

With respect to Exchange business, the company is expected to display a solid performance while maintaining a strong sales pipeline in both the middle and large markets. The company projects to enroll 45,000-55,000 retirees for the remainder of 2018.

Further, continued share buybacks and a lower tax incidence have possibly cushioned the company’s bottom line in the soon-to-be-reported quarter.

However, the insurance broker is anticipated to incur higher operating expenses, which can limit the operating margin expansion, hurting the company’s overall performance in turn. Notably, the company projects transaction integration costs between $140 million and $150 million in comparison to the previously guided count of $140 million.

Nonetheless, pertaining to its positive surprise trend, the company delivered an earnings beat in three of the last four quarters with an average of 2.18%.

Other Stocks to Consider

Some other stocks worth considering from the finance sector with the right combination of elements to also exceed estimates this time around are as follows:

CNA Financial Corporation (CNA - Free Report) is set to report third-quarter earnings on Nov 5 and has an Earnings ESP of +4.19%. The company is a Zacks #2 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

TCG BDC, Inc. (CGBD - Free Report) has an Earnings ESP of +1.65% and a Zacks Rank #2. The company is set to release third-quarter earnings on Nov 6.

Prudential Financial, Inc. (PRU - Free Report) has an Earnings ESP of +0.13% and a Zacks Rank of 2. The company is set to announce third-quarter earnings on Nov 7.

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