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Willis Towers (WLTW) Q2 Earnings Miss Estimates, View Cut

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Willis Towers Watson Public Limited Company (WLTW - Free Report) reported second-quarter 2017 adjusted net income of $1.45 per share that missed the Zacks Consensus Estimate of $1.48 by 2%. Earnings also deteriorated 12.7% year over year.

Decrease in revenues as well as higher expenses were responsible for the downside.

Nonetheless, the company remains focused toward building momentum across its portfolio of businesses while work continues on the integration efforts.

Including amortization, restructuring costs as well as integration and transaction expenses, net income came in at 24 cents per share, which plunged 52.9% year over year.

Operational Updates

Adjusted revenues slipped 1.1% (up 1% on a constant currency basis as well as organic basis) year over year to $1.95 billion. Revenues beat the Zacks Consensus Estimate of $1.94 billion.

Commissions and fees were $1.9 billion, up 1.9% year over year.

Total costs of providing services inched up 0.9% year over year to $1.8 million.

Adjusted EBITDA of $387 million decreased 4.7% year over year. Adjusted EBITDA margin contracted 80 basis points to 19.8%.

Adjusted operating income rose 1.7% year over year to $363 million in the quarter.

Quarterly Segment Update

Human Capital & Benefits: Commissions and fees of $718 million were down 1.8% year over year (1% higher on constant currency basis but flat on an organic basis). Total revenue of $729 million was down about 1%. Operating margin was 17%.

Corporate Risk & Broking: Commissions and fees of $624 million dipped 0.5% (1% higher on constant currency basis as well as organic basis) year over year. Total revenue of $630 million dipped 0.5% year over year. Operating margin was 16% in the quarter.

Investment, Risk & Reinsurance: Commissions and fees of $383 million were up 0.8% (3% higher on constant currency basis as well as organic basis). Total revenue of $389 million declined 8.3% from the prior-year quarter. Operating margin was 25%.

Exchange Solutions: Commission and fees of $178 million improved 15.6% (15% higher on constant currency basis as well as organic basis). Total revenue of $178 million climbed 14.8% year over year. Operating margin was 19%.

Financial Update

Cash and cash equivalents declined 2.1% to $852 million from the 2016-end level.

Long-term debt surged 22% from the 2016-end level to nearly $4.1 billion at the quarter-end.

Shareholders’ equity increased about 2% from the end of 2016 to $10.3 billion as of Jun 30, 2017.

For the first six months of 2017, cash from operations plunged 26.8% to $319 million compared with $436 million in the same period, last year. Free cash flow was $200 million for the first half of 2017, down 41.9% compared with $344 million during the same period of 2016.

2017 Guidance Revised

Willis Towers expects adjusted earnings per share between $8.36 and $8.51 in 2017. This revised adjusted earnings per share range represents a decline of $0.04 from the previous guidance, due to divestiture of the Global Wealth Solutions business. Constant currency revenue growth is estimated in the range of 2–3%.

Zacks Rank

Willis Towers presently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported their second-quarter earnings so far, The Progressive Corporation (PGR - Free Report) as well as The Travelers Companies, Inc’s. (TRV - Free Report) bottom line missed the Zacks Consensus Estimate, while RLI Corp. (RLI - Free Report) beat the same.

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