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Here's Why Hold Strategy is Apt for Willis Towers (WTW) Stock
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Willis Towers Watson Public Limited Company (WTW - Free Report) has been in investors' good books on the back of growing healthcare premiums, increased consulting work and software sales, strategic buyouts and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for Willis Towers’ 2023 earnings is pegged at $14.39, indicating a 7.31% increase from the year-ago reported figure on 4.4% higher revenues of $9.26 billion. The consensus estimate for 2024 earnings is $16.89, indicating a 17.3% increase from the year-ago reported figure on 5% higher revenues of $9.72 billion.
Earnings Surprise History
WTW has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 1.24%.
Zacks Rank & Price Performance
Willis Towers currently has a Zacks Rank #3 (Hold). The stock has gained 14.9% compared with the industry’s growth of 19% in the past year.
Image Source: Zacks Investment Research
Business Tailwinds
The Health, Wealth & Career segment is expected to gain from higher demand for products and advisory work, new client appointments and growing healthcare premiums. Increased consulting work, strong client demand for talent and compensation products and employee engagement offerings are also likely to add to the upside.
The Corporate Risk and Broking segment is expected to gain from double-digit growth across global lines of business, notably in Aerospace, Natural Resources and FINEX, improved client retention as well as strong contributions from both construction and M&A solutions. Increased software sales and advisory work should continue to drive the Insurance Consulting and Technology business.
Willis Towers’ growth strategy focuses on core opportunities with the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets. Strategic buyouts add to the upside apart from expanding its geographical footprint, increasing capabilities and strengthening its portfolio.
The company transferred its ownership of its Russian subsidiaries to local management in 2022. Considering the completion of the divestiture, it recast its 2024 financial targets. WTW remains committed to delivering mid-single-digit organic revenue growth and 400-500 basis points of adjusted operating margin expansion. It expects to increase its revenues to more than $9.9 billion. It expects to generate annual cost savings in excess of $360 million by the end of 2024.
The insurer expects adjusted earnings per share of $17.5-$20.5 and three-year free cash flow (FCF) of $4.3-$5.3 billion. The transformation program delivered $75 million of incremental annualized savings in the first quarter of 2023. The company expects to deliver approximately $100 million of incremental run-rate savings from the transformation program in 2023. It brings the total cumulative annualized savings to $224 million since the program's inception.
Willis Towers has been improving its liquidity while maintaining a solid balance sheet. FCF should continue to improve riding on favorable working capital improvements, resulting mostly from higher cash collections and lower discretionary compensation payments. Over the long term, the company expects continual improvement toward peers’ free cash flow margins.
The company remains committed to enhancing its shareholders value. Its dividend witnessed an eight-year CAGR (2016-2023) of nearly 7.2%. The brokerage insurer intends to repay in full $250 million of 4.625% senior notes, which mature during the third quarter of 2023.
Willis Towers remains focused on deploying excess capital and cash flow into share repurchases. With a solid financial position, it intends to continue to reward its shareholders, technology and new business opportunities and pursue opportunistic mergers and acquisitions.
Brown & Brown has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 1.19%. In the past year, BRO has gained 12.1%.
The Zacks Consensus Estimate for BRO’s 2023 and 2024 earnings per share is pegged at $2.52 and $2.75, indicating a year-over-year increase of 10.5% and 9.2%, respectively.
Aon has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 1.64%. In the past year, AON has rallied 22.9%.
The Zacks Consensus Estimate for AON’s 2023 and 2024 earnings per share is pegged at $14.38 and $16.06, indicating a year-over-year increase of 7.3% and 11.7%, respectively.
Marsh & McLennan has a solid track record of beating earnings estimates in each of the last four quarters, the average being 2.90%. In the past year, MMC has climbed 19.3%.
The Zacks Consensus Estimate for MMC’s 2023 and 2024 earnings per share is pegged at $7.68 and $8.28, indicating a year-over-year increase of 12.1% and 7.8%, respectively.
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Here's Why Hold Strategy is Apt for Willis Towers (WTW) Stock
Willis Towers Watson Public Limited Company (WTW - Free Report) has been in investors' good books on the back of growing healthcare premiums, increased consulting work and software sales, strategic buyouts and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for Willis Towers’ 2023 earnings is pegged at $14.39, indicating a 7.31% increase from the year-ago reported figure on 4.4% higher revenues of $9.26 billion. The consensus estimate for 2024 earnings is $16.89, indicating a 17.3% increase from the year-ago reported figure on 5% higher revenues of $9.72 billion.
Earnings Surprise History
WTW has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 1.24%.
Zacks Rank & Price Performance
Willis Towers currently has a Zacks Rank #3 (Hold). The stock has gained 14.9% compared with the industry’s growth of 19% in the past year.
Image Source: Zacks Investment Research
Business Tailwinds
The Health, Wealth & Career segment is expected to gain from higher demand for products and advisory work, new client appointments and growing healthcare premiums. Increased consulting work, strong client demand for talent and compensation products and employee engagement offerings are also likely to add to the upside.
The Corporate Risk and Broking segment is expected to gain from double-digit growth across global lines of business, notably in Aerospace, Natural Resources and FINEX, improved client retention as well as strong contributions from both construction and M&A solutions. Increased software sales and advisory work should continue to drive the Insurance Consulting and Technology business.
Willis Towers’ growth strategy focuses on core opportunities with the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets. Strategic buyouts add to the upside apart from expanding its geographical footprint, increasing capabilities and strengthening its portfolio.
The company transferred its ownership of its Russian subsidiaries to local management in 2022. Considering the completion of the divestiture, it recast its 2024 financial targets. WTW remains committed to delivering mid-single-digit organic revenue growth and 400-500 basis points of adjusted operating margin expansion. It expects to increase its revenues to more than $9.9 billion. It expects to generate annual cost savings in excess of $360 million by the end of 2024.
The insurer expects adjusted earnings per share of $17.5-$20.5 and three-year free cash flow (FCF) of $4.3-$5.3 billion. The transformation program delivered $75 million of incremental annualized savings in the first quarter of 2023. The company expects to deliver approximately $100 million of incremental run-rate savings from the transformation program in 2023. It brings the total cumulative annualized savings to $224 million since the program's inception.
Willis Towers has been improving its liquidity while maintaining a solid balance sheet. FCF should continue to improve riding on favorable working capital improvements, resulting mostly from higher cash collections and lower discretionary compensation payments. Over the long term, the company expects continual improvement toward peers’ free cash flow margins.
The company remains committed to enhancing its shareholders value. Its dividend witnessed an eight-year CAGR (2016-2023) of nearly 7.2%. The brokerage insurer intends to repay in full $250 million of 4.625% senior notes, which mature during the third quarter of 2023.
Willis Towers remains focused on deploying excess capital and cash flow into share repurchases. With a solid financial position, it intends to continue to reward its shareholders, technology and new business opportunities and pursue opportunistic mergers and acquisitions.
Stocks to Consider
Some better-ranked stocks from the brokerage insurance industry are Brown & Brown, Inc. (BRO - Free Report) , Aon plc (AON - Free Report) and Marsh & McLennan Companies, Inc. (MMC - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Brown & Brown has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 1.19%. In the past year, BRO has gained 12.1%.
The Zacks Consensus Estimate for BRO’s 2023 and 2024 earnings per share is pegged at $2.52 and $2.75, indicating a year-over-year increase of 10.5% and 9.2%, respectively.
Aon has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 1.64%. In the past year, AON has rallied 22.9%.
The Zacks Consensus Estimate for AON’s 2023 and 2024 earnings per share is pegged at $14.38 and $16.06, indicating a year-over-year increase of 7.3% and 11.7%, respectively.
Marsh & McLennan has a solid track record of beating earnings estimates in each of the last four quarters, the average being 2.90%. In the past year, MMC has climbed 19.3%.
The Zacks Consensus Estimate for MMC’s 2023 and 2024 earnings per share is pegged at $7.68 and $8.28, indicating a year-over-year increase of 12.1% and 7.8%, respectively.