Yahoo Finance Here's Why Hold Strategy is Apt for Willis Towers (WTW)
Willis Towers Watson Public Limited Company WTW has been favored by investors on the back of growth across global lines of business, strategic inorganic expansion, contributions from M&A solutions and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for Willis Towers’ 2023 earnings is pegged at $14.58, indicating an 8.7% increase from the year-ago reported figure on 3.5% higher revenues of $9.18 billion. The consensus estimate for 2024 earnings is $17.19, indicating a 17.9% increase from the year-ago reported figure on 5.1% higher revenues of $9.66 billion.
Earnings Surprise History
Willis Towers has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 2.46%.
Zacks Rank & Price Performance
The company currently has a Zacks Rank #3 (Hold). The stock has rallied 1.3% against the industry’s decline of 1.2% in the past year.
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Business Tailwinds
The Health, Wealth & Career segment is expected to gain from higher demand for products and advisory work, new client appointments and growing healthcare premiums. Increased consulting work, strong client demand for talent and compensation products and employee engagement offerings are also likely to add to the upside.
The Corporate Risk and Broking segment is expected to gain from double-digit growth across global lines of business, notably in Aerospace, Natural Resources and FINEX, improved client retention as well as strong contributions from both construction and M&A solutions. Increased software sales and advisory work should continue to drive the Insurance Consulting and Technology business.
Willis Towers’ growth strategy focuses on core opportunities with the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets. Strategic buyouts add to the upside apart from expanding its geographical footprint, increasing capabilities and strengthening its portfolio.
In the third quarter of 2022, Willis Towers transferred its ownership of its Russian subsidiaries to local management. Considering the completion of the divestiture, it recasts its 2024 financial targets. The company now projects the annualized run-rate impact from the divestiture of its Russian operations to be nearly $120 million.
While recasting its targets, the company remained committed to delivering mid-single digit organic revenue growth and 400-500 bps of adjusted operating margin expansion. It expects to increase its revenues to more than $9.9 billion. WTW also expects adjusted earnings per share in the range of $17.5-$20.5 and three-year free cash flow of $4.3-$5.3 billion.
Willis Towers has been improving its liquidity while maintaining a solid balance sheet. Sufficient cash and cash equivalents suggest that the company has adequate cash reserves to meet its short-term debt obligations. WTW remains committed to achieve cumulative three-year free cash flow target of $4.3 billion to $5.3 billion in 2023. It also expects an improvement in free cash flow.
Willis Towers remains committed to enhancing its shareholders value. Its dividend witnessed an eight-year CAGR (2016-2023) of nearly 7.2%. In 2022, the company returned a significant amount of capital to shareholders, paying $369 million in dividends and repurchasing shares for $3.5 billion.
Willis Towers remains focused on deploying excess capital and cash flow into share repurchases. With a solid financial position, it intends to continue to reward its shareholders, technology and new business opportunities and pursue opportunistic mergers and acquisitions.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Kinsale Capital Group, Inc. KNSL, Everest Re Group, Ltd. RE and Selective Insurance Group, Inc. SIGI. While Kinsale Capital sports a Zacks Rank #1 (Strong Buy), Everest Re and Selective Insurance carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. In the past year, KNSL has gained 28.3%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $9.92 and $11.94, indicating a year-over-year increase of 27.1% and 20.4%, respectively.
Everest Re beat estimates in each of the last four quarters, the average being 18.41%.
The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $45.63 and $53.28, indicating a year-over-year increase of 68.5% and 16.7%, respectively. In the past year, RE has gained 22.4%.
The Zacks Consensus Estimate for Selective Insurance’s 2023 and 2024 earnings per share is pegged at $6.57 and $7.55, indicating a year-over-year increase of 30.6% and 14.9%, respectively. In the past year, SIGI has gained 7.6%.
The Zacks Consensus Estimate for SIGI’s 2023 and 2024 revenues is pegged at $4.17 billion and $4.60 billion, indicating a year-over-year increase of 13.6% and 10.1%, respectively.
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Everest Re Group, Ltd. (RE) : Free Stock Analysis Report
Selective Insurance Group, Inc. (SIGI) : Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report
Kinsale Capital Group, Inc. (KNSL) : Free Stock Analysis Report
