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Here's Why Hold is an Apt Strategy for Willis Towers (WLTW)

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Willis Towers Watson plc is poised for growth on segmental strength driving organic commissions and fees and solid customer retention levels. Growing new business, strategic buyouts, solid capital position and favorable growth estimates make Willis Towers stock worth retaining in one’s portfolio.

Willis Towers has a solid track record of beating earnings estimates in the last 10 quarters. Its earnings have witnessed a three-year CAGR of 10%.

Zacks Rank & Price Performance

Willis Towers currently carries a Zacks Rank #3 (Hold). Year to date, the stock has gained 11%, compared with the industry’s increase of 26%.

Zacks Investment ResearchImage Source: Zacks Investment Research

Growth Projections

The Zacks Consensus Estimate for Willis Towers’ 2021 earnings is pegged at $11.31, indicating a 12.1% increase from the year-ago reported figure. The consensus estimate for 2022 earnings is pegged at $13.89, indicating an increase of 5.6% year over year.

Willis Towers targets to deliver adjusted earnings per share between $18 and $21 by 2024.  It has a Growth Score of B.

Style Score

Willis Towers has an impressive VGM Score of B. This style score rates stocks on their combined weighted styles, helping to identify those with the most attractive value, best growth, and momentum.

Business Tailwinds

Strong customer retention levels and growing new business should continue to fuel revenue growth at Willis Towers that witnessed a three-year CAGR (2018-2020) of 4.8%, thus driving 200 basis points margin expansion over the same time frame. Most of the operating regions experienced revenue growth for 13 straight quarters.

In 2021, Willis Towers expects to record around 6% organic revenue growth and an adjusted operating margin of 19.5% and 20% on a continuing operations basis.

Willis Towers' strategic acquisitions have expanded its geographical footprint. In November 2021, WLTW agreed to buy Leaderim to strengthen its presence in Israel as well as  acquire the remaining 51% shares from Anemone Holdings Private Ltd and Rohit Jain in Willis Towers Watson (WTW) India to capitalize on the significant growth opportunities in the non-life insurance market.

Willis Towers aims to generate more than $10 billion in revenues by 2024, driving 24-25% adjusted operating margin. While WLTE stays focused on core opportunities to deliver the highest growth and return, it also looks for strategic inorganic expansion to drive growth.

Willis Towers expects $300 million in run-rate savings to contribute 300 basis points margin improvement, driven by $750 million investment over a three-year period through 2024.

Willis Towers has been improving its liquidity while maintaining a solid balance sheet.

Effective Capital Deployment

With 13% dividend hikes in August 2021, the dividend increased at a five-year CAGR of 9%. The board recently approved a $4 billion increase in its share buyback program and thus has $5.5 billion under its authorization. Willis Towers aims to return capital to shareholders, beginning with the execution of more than $4 billion in share buybacks between 2021 and 2022.

Willis Towers estimates to deploy $10-$11 billion in capital through 2024 to drive shareholder value with new investment and aims for industry-leading total shareholder return.

Stocks to Consider

Some better-ranked stocks from the same industry include Brown & Brown, Inc. (BRO - Free Report) , Ryan Specialty Group Holdings Inc. (RYAN - Free Report) and Cincinnati Financial Corporation (CINF - Free Report) , each carrying a Zacks Rank #2 (Buy).  You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Brown & Brown has witnessed its 2021 earnings estimate move 0.5% north over the past 30 days. BRO came up with a trailing four-quarter surprise of 18.3% on average.

Ryan Specialty Group Holdings has witnessed its 2021 earnings estimate move 7% north over the past 30 days. RYAN managed to come up with a trailing four-quarter surprise of 41.18%, on average.

The Zacks Consensus Estimate for 2021 earnings of Cincinnati Financial implies a 64% year-over-year increase. CINF delivered a four-quarter average earnings surprise of 40.05%.

Shares of Brown & Brown, Ryan Specialty and Cincinnati Financial have gained 41.7%, 39.8% and 33.2%, respectively year to date.  


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