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Here's Why You Should Retain Willis Towers (WLTW) Stock Now

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Willis Towers Watson Public Limited Company (WLTW - Free Report) has efficiently met the evolving demands and expectations of its clientele over time, creating a solid service portfolio in the process. Maintaining this impressive track record, this Zacks Rank #3 (Hold) insurance broker continues to deliver consistently only to emerge with more flying colors on the road ahead.  

Positive Growth Projections: The Zacks Consensus Estimate for earnings per share is $8.42 on revenues of $8.09 billion for 2017. While the top line reflects a year-over-year increase 2.5%, the bottom line surges 5.8%. For 2018, the Zacks Consensus Estimate for earnings per share is pegged at $9.75 on $8.36 billion revenues. While earnings represent a 15.8% rally, revenues reflect a 3.4% rise. Willis Towers has long-term expected earnings per share growth of 10.0%.

An Outperformer: Shares of Willis Towers have surged 21.03% year to date, outperforming the industry’s 15.35% rally. We expect improving commissions and fees, operating income growth and a robust capital position to drive the stock higher in the near term.

Growth Drivers

Willis Towers has been witnessing a solid revenue rise on organic growth in commissions and fees. The insurance broker projects constant currency revenue growth of 2-3% in 2017. Also, with respect to exchange, we expect the company’s business to retain a solid momentum.

Interestingly, the company’s 2017 sales pipeline remains strong, especially in the mid-market. Plus, Willis Towers continues to maintain a robust 2018 sales pipeline in both mid and large markets.

Notably, the insurance broker now expects organic revenue growth between 2% and 3%, while revenue synergies are likely to be heavily skewed into 2017 and 2018.

Willis Towers anticipates achieving cost synergies of $125 million by 2018. Merger-related cost savings are estimated at $30 million in 2017, which should aid margin expansion. The company’s Operational Improvement Program (started in the second quarter of 2014) is expected to help it meet 25% adjusted EBITDA margin goal by 2018.

Willis Towers projects additional savings of approximately $95 million in 2017. As a result, lower level of costs will boost margin expansion at the company. Notably, the aforementioned program is estimated to get complete by the end of 2017.

Willis Towers deploys capital effectively to enhance shareholders’ value via dividend increases and share buybacks. The company also has $837 million remaining under its share repurchase authorization. Willis Towers intends to repurchase $837 million worth shares during the remainder of 2017 and 2018.

Positive Earnings Surprise History: Willis Towers has surpassed the Zacks Consensus Estimate in three of the last four quarters with an average beat of 6.78%.

Near-Term Headwinds

However, Willis Towers’ rising operating expenses are a headwind as it might restrict the operating margin expansion. Also, in 2017, the insurance broker expects to incur about $200 million of expense for integration related items.

Stocks to Consider

Some better-ranked stocks from the insurance industry are First American Corporation (FAF - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Argo Group International Holdings, Ltd. .

First American Corporation provides financial services. The company delivered positive surprises in all the last four quarters with an average beat of 12.64%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here

CNO Financial develops, markets and administers health insurance, annuity, individual life insurance and other insurance products for senior and middle-income markets in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.69%. The company holds a Zacks Rank #2 (Buy).

Argo Group underwrites specialty insurance and reinsurance products in the property and casualty market worldwide. The company delivered positive surprises in all the last four quarters with an average beat of 26.51%. The company carries a Zacks Rank #2.

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