Willis Towers Watson Public Limited Company (WLTW - Free Report) is well poised for growth on the back of its capital position and strategic initiatives.
Its third-quarter 2019 adjusted earnings of $1.31 per share beat the Zacks Consensus Estimate by 0.8%. The company witnessed strong total and organic revenue growth and continued margin expansion.
The company’s revenues have been witnessing an uptick on organic growth in commission and fees. Commissions and fees associated with business transactions showed improvement, riding on segmental organic growth and rich contribution from acquisitions. Its geographic diversification supports overall progress. With solid customer retention levels and thriving new business, we expect Willis Towers to ramp up its revenues.
Additionally, Willis Towers’ exchange business continues to retain solid momentum. The company maintains a robust 2019 sales pipeline in both the middle and large markets.
Its strategic initiatives, such as certain buyouts helped it expand its geographical existence in places like Italy, Canada, the U.K. and France. Recently, the company acquired TRANZACT to speed up its direct-to-consumer U.S. health care strategy and strengthen its profile in the health care space.
Its improving liquidity owing to a solid balance sheet also impresses. Steady cash flow is expected to help the company engage in capital deployment for buybacks, dividend payouts, debt repayments, acquisitions and investments that drive and support growth. With a solid financial position, we expect the company to continue rewarding its shareholders, retaining investor confidence in the stock and attracting potential investors.
However, its operating expenses have been rising over the last several quarters, resulting in the contraction of margins. Expenses more than doubled in the last five years with net margin contracting 130 basis points.
The Zacks Consensus Estimate for current-year earnings is pegged at $10.92, suggesting an improvement of 12.2% from the year-ago reported number. Meanwhile, the consensus mark for revenues stands at $8.9 billion, indicating 5.6% growth from the year-ago reported figure.
For 2020, the Zacks Consensus Estimate for earnings stands at $11.94, hinting at 9.4% growth from the year-earlier reported figure. Further, the consensus mark for revenues is pegged at $9.5 billion, implying 6.2% rise from the year-earlier reported figure.
Shares of this Zacks Rank #3 (Hold) company have rallied 19.4% in a year, underperforming its industry’s growth of 20.3%.
Stocks to Consider
Investors interested in the insurance industry can take a look at some better-ranked stocks like Erie Indemnity Company (ERIE - Free Report) , Radian Group Inc. (RDN - Free Report) , MGIC Investment Corporation (MTG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Erie Indemnity Company works as a managing attorney-in-fact for subscribers at the Erie Insurance Exchange in the United States. It came up with average four-quarter positive surprise of 4.9%.
Radian Group engages in the mortgage and real estate services business in the United States. The company pulled off average positive surprise of 10.1% in the last four quarters.
MGIC Investment Corporation provides private mortgage insurance, other mortgage credit risk management solutions and ancillary services. It managed to deliver a positive surprise in all the trailing four quarters, the average being 12.6%.
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