It has been about a month since the last earnings report for Willis Towers Watson Public Limited Company (WLTW - Free Report) . Shares have added about 3% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Willis Towers Beats Q1 Earnings and Revenue Estimates
Willis Towers Watson reported first-quarter 2017 adjusted net income of $3.71 per share that beat the Zacks Consensus Estimate of $3.33. Earnings also increased 9% year over year.
Increase in revenues as well as lower expenses supported the upside.
Including amortization, restructuring costs as well as integration and transaction expenses, net income came in at $2.50 per share, up 43% year over year.
Adjusted revenues improved 2% (up 5% on a constant currency basis as well as organic basis) year over year to $2.319 billion. Revenues narrowly beat the Zacks Consensus Estimate of $2.283 billion.
Commissions and fees were $2.3 billion, up 3.8% year over year.
Total costs of providing services decreased 2.7% year over year to $1.9 million.
Adjusted EBITDA of $708 million increased 5.5% year over year. Adjusted EBITDA margin expanded 90 basis points to 30.5%.
Adjusted operating income increased 5.4% year over year to $681 million in the quarter.
Quarterly Segment Update
Human Capital & Benefits: Commissions and fees of $951 million were up 3% year over year (5% higher on constant currency basis as well as organic basis). Total revenue of $955 million was up 2.7%. Operating margin was 37%.
Corporate Risk & Broking: Commissions and fees of $650 million inched up 1% (3% higher on constant currency basis as well as organic basis) year over year. Total revenue of $655 million climbed 1.2% year over year. Operating margin was 19% in the quarter.
Investment, Risk & Reinsurance: Commissions and fees of $502 million were up 1% (5% higher on constant currency basis as well as organic basis). Total revenue of $507 million increased 1% from the prior-year quarter. Operating margin was 44%.
Exchange Solutions: Commission and fees of $179 million improved 10% (10% higher on constant currency basis as well as organic basis). Total revenue of $179 million jumped 10% year over year. Operating margin was 21%.
Cash and cash equivalents improved 3.6% to $901 million from the 2016-end level.
Long-term debt increased 18% from the 2016-end level to nearly $4 billion at the quarter end.
Shareholders equity increased 2.1% from the end of 2016 to $10.3 billion as of Mar 31, 2017.
Cash from operations declined 20% year over year to $95 million. Free cash flow was $33 million, down 54% year over year.
Willis Towers expects adjusted earnings per share between $8.40 and $8.55 in 2017. Constant currency revenue growth is estimated in the range of 2–3%.
How Have Estimates Been Moving Since Then?
Following the release, investors have witnessed a downward trend in fresh estimates. There has been one revision higher for the current quarter compared to three lower.
Willis Towers Watson Public Limited Company Price and Consensus
At this time, the stock has a subpar Growth Score of 'D', however its momentum is lagging a bit with a 'F'. However, the stock was allocated a grade of 'D' on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.