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Willis Towers Stock Rises 38.8% in a Year: More Room for Growth?
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Willis Towers Watson Public Limited Company’s (WTW - Free Report) shares have rallied 38.8% in a year compared with the industry's growth of 17.1%. The Finance sector and the Zacks S&P 500 index have returned 26.5% and 24.8% in the said time frame, respectively. With a market capitalization of $29.25 billion, the average volume of shares traded in the last three months was 0.4 million.
WTW Outperforms Industry, Sector, S&P 500
Image Source: Zacks Investment Research
The rally was driven by new business, strategic acquisitions, geographic diversification, solid customer retention levels and a strong capital position, along with solid growth projections.
WTW Witnessing Northbound Estimate Revision
The Zacks Consensus Estimate for Willis Towers’ 2024 and 2025 earnings has moved 1.4% and 1.5% north, respectively, in the past 60 days, reflecting analyst optimism.
WTW’s Growth Projection Encourages
The Zacks Consensus Estimate for Willis Towers’ 2024 earnings per share indicates a year-over-year increase of 13.9%. The consensus estimate for revenues is pegged at $9.94 billion, implying a year-over-year improvement of 4.8%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 12.4% and 5%, respectively, from the corresponding 2024 estimates. The long-term earnings growth rate is currently pegged at 11.7%.
Factors Acting in Favor of WTW
Willis Towers’ growth strategy encompasses a focus on improving operating margins, increasing free cash flow conversion and driving sustainable revenue growth. Focus on core opportunities with the highest growth and return, which include gaining market share in Risk and Broking and Individual Marketplace, should spur long-term growth and return more value to shareholders.
Well-performing Health, Wealth & Career and Risk & Broking segments, driven by solid customer retention levels, growing new business and geographic diversification, continue to fuel the top line. Most of the company's operating regions experienced revenue growth for 15 straight quarters.
Strategic acquisitions have expanded its geographical footprint in the last few years in countries like Italy, Canada, the U.K. and France, as well as ramped up its product portfolio.
This Zacks Rank #3 (Hold) company expects to deliver revenues of more than $9.9 billion. Based on the strong first-half performance, WTW has raised the low end of 2024 adjusted operating margin and adjusted EPS target to 23-23.5% and $16-$17, respectively.
Solid operational performance ensures smooth cash flow. WTW continues to expect a year-over-year improvement in free cash flow margin in 2024
Distribution of Wealth
Banking on its capital position, WTW distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has witnessed a five-year CAGR (2019-2024) of 6.2%. Willis Towers’ dividend yield is currently pegged at 1.2%, which is above the industry average of 1%. The insurer continues to expect share repurchases to total approximately $750 million in 2024, subject to market conditions and other relevant factors.
Risks
Despite the upside potential, Willis Towers’ expenses have been rising over the last several quarters. Higher salary expenses, incentive costs, improved non-income-related tax expenses and marketing costs, higher restructuring costs, as well as increased consulting and compensation costs related to the Transformation program result in the contraction of margins.
Both return on equity and return on invested capital of this insurance broker compared unfavorably with the industry average, reflecting inefficiency in utilizing shareholders' funds to generate returns.
The Zacks Consensus Estimate for Marsh & McLennan’s 2024 and 2025 earnings implies year-over-year growth of 9.3% and 7.9%, respectively. MMC beat earnings estimates in each of the past four quarters, with an average surprise of 5.80%. In the past year, shares of MMC have gained 15.1%.
The Zacks Consensus Estimate for Brown & Brown’s 2024 and 2025 earnings implies year-over-year growth of 30.9% and 8.6%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.8%. In the past year, shares of BRO have jumped 39.7%.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 and 2025 earnings implies year-over-year growth of 15.9% and 12%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 1.93%. In the past year, shares of AJG have climbed 25.7%.
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Willis Towers Stock Rises 38.8% in a Year: More Room for Growth?
Willis Towers Watson Public Limited Company’s (WTW - Free Report) shares have rallied 38.8% in a year compared with the industry's growth of 17.1%. The Finance sector and the Zacks S&P 500 index have returned 26.5% and 24.8% in the said time frame, respectively. With a market capitalization of $29.25 billion, the average volume of shares traded in the last three months was 0.4 million.
WTW Outperforms Industry, Sector, S&P 500
Image Source: Zacks Investment Research
The rally was driven by new business, strategic acquisitions, geographic diversification, solid customer retention levels and a strong capital position, along with solid growth projections.
WTW Witnessing Northbound Estimate Revision
The Zacks Consensus Estimate for Willis Towers’ 2024 and 2025 earnings has moved 1.4% and 1.5% north, respectively, in the past 60 days, reflecting analyst optimism.
WTW’s Growth Projection Encourages
The Zacks Consensus Estimate for Willis Towers’ 2024 earnings per share indicates a year-over-year increase of 13.9%. The consensus estimate for revenues is pegged at $9.94 billion, implying a year-over-year improvement of 4.8%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 12.4% and 5%, respectively, from the corresponding 2024 estimates. The long-term earnings growth rate is currently pegged at 11.7%.
Factors Acting in Favor of WTW
Willis Towers’ growth strategy encompasses a focus on improving operating margins, increasing free cash flow conversion and driving sustainable revenue growth. Focus on core opportunities with the highest growth and return, which include gaining market share in Risk and Broking and Individual Marketplace, should spur long-term growth and return more value to shareholders.
Well-performing Health, Wealth & Career and Risk & Broking segments, driven by solid customer retention levels, growing new business and geographic diversification, continue to fuel the top line. Most of the company's operating regions experienced revenue growth for 15 straight quarters.
Strategic acquisitions have expanded its geographical footprint in the last few years in countries like Italy, Canada, the U.K. and France, as well as ramped up its product portfolio.
This Zacks Rank #3 (Hold) company expects to deliver revenues of more than $9.9 billion. Based on the strong first-half performance, WTW has raised the low end of 2024 adjusted operating margin and adjusted EPS target to 23-23.5% and $16-$17, respectively.
Solid operational performance ensures smooth cash flow. WTW continues to expect a year-over-year improvement in free cash flow margin in 2024
Distribution of Wealth
Banking on its capital position, WTW distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has witnessed a five-year CAGR (2019-2024) of 6.2%. Willis Towers’ dividend yield is currently pegged at 1.2%, which is above the industry average of 1%. The insurer continues to expect share repurchases to total approximately $750 million in 2024, subject to market conditions and other relevant factors.
Risks
Despite the upside potential, Willis Towers’ expenses have been rising over the last several quarters. Higher salary expenses, incentive costs, improved non-income-related tax expenses and marketing costs, higher restructuring costs, as well as increased consulting and compensation costs related to the Transformation program result in the contraction of margins.
Both return on equity and return on invested capital of this insurance broker compared unfavorably with the industry average, reflecting inefficiency in utilizing shareholders' funds to generate returns.
Key Picks
Investors interested in the brokerage insurance industry may look at some better-ranked players like Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Arthur J. Gallagher & Co. (AJG - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Marsh & McLennan’s 2024 and 2025 earnings implies year-over-year growth of 9.3% and 7.9%, respectively. MMC beat earnings estimates in each of the past four quarters, with an average surprise of 5.80%. In the past year, shares of MMC have gained 15.1%.
The Zacks Consensus Estimate for Brown & Brown’s 2024 and 2025 earnings implies year-over-year growth of 30.9% and 8.6%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.8%. In the past year, shares of BRO have jumped 39.7%.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 and 2025 earnings implies year-over-year growth of 15.9% and 12%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 1.93%. In the past year, shares of AJG have climbed 25.7%.