Back to top

Analyst Blog

On Feb 26, 2013, we upgraded Willis Group Holdings plc (WSH - Analyst Report) to Neutral from Underperform due to its solid performance in the fourth quarter. Moreover, management is reviewing the organizational design to drive cost savings for this Zacks Rank #3 (Hold) insurance broker.

Why the Upgrade?

Willis Group posted adjusted net income from continuing operations of 45 cents per share, surpassing the Zacks Consensus Estimate by a penny.

The company generated organic growth in commissions and fees of 7.5% in the fourth quarter, the highest growth rate since the third quarter of 2006, with contribution from all the segments.

Further, Willis Group, to enhance its profitability, is undertaking a cost savings initiative. Management is reviewing the organizational design and expects to reduce headcount. It expects to realize cost savings of $20 million to $25 million in 2013 and annualized cost savings of approximately $25 million to $30 million.

The review will be completed in the first quarter of 2013. As a result, Willis Group expects to incur a pre-tax charge of about $35 million to $45 million in the first quarter of 2013.

Moreover, Willis Group has consistently tried to enhance shareholder value via dividend increase as well as share buybacks. It already exhausted its $100 million buyback program in 2012 and recently hiked dividend by 3.7%. The company’s dividend yield is 3.05%, ahead of the industry yield of 1.64% and Marsh & McLennan Companies Inc.’s (MMC - Analyst Report) yield of 2.55%.  

The Zacks Consensus Estimate for 2013 is currently pegged at $2.66 per share, up 3% year over year.

Other Stocks to Consider

Among other insurance brokers, Brown & Brown Inc. (BRO - Snapshot Report), and Arthur J Gallagher & Co. (AJG - Snapshot Report) carry a Zacks Rank #2 (Buy), and appear impressive.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
RPC INC RES 24.91 +8.35%
LITHIA MOTO… LAD 94.59 +4.60%
DELTA AIR L… DAL 39.15 +3.90%
FLAMEL TECH… FLML 14.51 +3.50%
SOUTHWEST A… LUV 28.87 +2.92%