Willis Towers Watson Public Limited Company (WLTW - Free Report) remains well-poised for growth, banking on solid segmental performance, high retention level and sturdy capital position, aiding capital deployment. This Zacks Rank #2 (Buy) company is a leading global advisory, broking and solutions company.
Organic growth across segments and accretions from acquisitions, coupled with solid customer retention and growing new business, should continue to drive improvement in revenues. Constant currency revenue growth is estimated to be around 4% in 2018.
Solid segmental outlook too raises optimism about the stock. Growth is estimated in the low-single digit for Human Capital & Benefits, Corporate Risk & Broking, and Investment, Risk & Reinsurance while the same for Benefits Delivery & Administration is projected in the mid- to a high-single digit.
The company’s exchange business also gained momentum. While already 0.3 million lives have been enrolled for 2019, the company remains upbeat about long-term growth of this business.
Given a solid capital position, the company has been pursuing initiatives to ramp up growth. Its inorganic story remains impressive to help it expand geographically as well as add capabilities.
Shares of Willis Towers Watson have gained 0.4% year to date, underperforming the industry’s 7.4% increase.
The company boasts solid capital management. Its dividend more than doubled in the last five years. The dividend currently yields 1.6%. The company targets dividend payout ratio of about 25%. Further, this insurance broker aims $600-$800 million worth share buyback in 2018. Additionally, free cash flow is estimated between $0.9 billion and $1.1 billion for 2018.
The stock seems attractive at the current level. Price to book value of 1.95x, which is the valuation multiple used for insurance industry because of large variations in their earnings results from one quarter to the next, is lower than the industry average of 4.81x. Undervalued stocks with solid fundamentals offer solid opportunity for higher return.
The Zacks Consensus Estimate for earnings reflects a year-over-year increase of 15.4% on 3.9% higher revenues in 2018. For 2019, the consensus mark for earnings is expected to improve 12.1% as revenues rise 3.9%. The expected long-term earnings growth rate is pegged at 11.9%, higher than the industry average of 11.6%.
Moreover, the consensus mark for 2018 and 2019 moved north 2.6% and 2.5%, respectively, as all the analysts raised their estimates in the last 60 days.
Other Stocks to Consider
Investors interested in the insurance industry can consider Arthur J. Gallagher & Co. (AJG - Free Report) , eHealth, Inc. (EHTH - Free Report) and MetLife, Inc. (MET - Free Report) , each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Arthur J. Gallagher provides insurance brokerage, consulting, and third party claim settlement and administration services to entities in the United States and internationally. The company delivered positive surprise of 1.30% in the last reported quarter.
eHealth provides private online health insurance exchange services to individuals, families, and small businesses in the United States and China. The company delivered positive surprise of 50.0% in the last reported quarter.
MetLife engages in the insurance, annuities, employee benefits, and asset management businesses. The company pulled off a positive surprise of 10.40% in the last reported quarter.
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