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Willis Towers Rallies 37.3% in a Year: What's Driving the Stock?
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Willis Towers Watson Public Limited Company (WTW - Free Report) shares have rallied 37.3% in a year compared with the industry's growth of 26.3%. The Finance sector and the Zacks S&P 500 index have returned 33.6% and 33.7% in the said time frame, respectively. With a market capitalization of $29.49 billion, the average volume of shares traded in the last three months was 0.4 million.
WTW Outperforms Industry, Sector & S&P in a Year
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 Trading Above 50-Day and 200-Day Moving Average
This Zacks Rank #3 (Hold) insurance broker closed at $290.39 on Wednesday, above its 50-day and 200-day simple moving average (SMA) of $283.06 and $264.71, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
WTW Earnings Surprise History
Willis Towers has a decent earnings surprise history. Its earnings beat estimates in each of the last four quarters with an average surprise of 7.06%.
WTW’s Growth Projection Encourages
The Zacks Consensus Estimate for Willis Towers’s 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.
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.
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%. The insurer continues to expect share repurchases to total approximately $750 million in 2024, subject to market conditions and other relevant factors.
Shares are Affordable
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 16.11, higher than the industry average of 21.83.
Concerns Regarding WTW
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.
Three out of the 11 analysts covering the stock have raised estimates for 2024 and 2025 over the past 60 days. Two analysts have lowered the estimates for both 2024 and 2025. The Zacks Consensus Estimate for PFG’s 2024 and 2025 earnings has moved 0.9% and 0.05% south, respectively, in the past 60 days.
WTW’s trailing 12-month ROE of 16.9% is weak when compared with the industry average of 32.3%, reflecting its inefficiency in using shareholders' funds.
The Zacks Consensus Estimate for Marsh & McLennan’s 2024 and 2025 earnings implies year-over-year growth of 9.3% and 8.1%, 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 15.7%.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 and 2025 earnings implies year-over-year growth of 31.1% and 21.9%, respectively. It beat earnings estimates in one of the past four quarters while matched in the other three, with an average surprise of 0.44%. In the past year, shares of RYAN have jumped 37%.
The Zacks Consensus Estimate for Cincinnati Financial’s 2024 and 2025 earnings implies year-over-year growth of 9.1% and 7%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 27.01%. In the past year, shares of CINF have climbed 28.5%.
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Willis Towers Rallies 37.3% in a Year: What's Driving the Stock?
Willis Towers Watson Public Limited Company (WTW - Free Report) shares have rallied 37.3% in a year compared with the industry's growth of 26.3%. The Finance sector and the Zacks S&P 500 index have returned 33.6% and 33.7% in the said time frame, respectively. With a market capitalization of $29.49 billion, the average volume of shares traded in the last three months was 0.4 million.
WTW Outperforms Industry, Sector & S&P in a Year
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 Trading Above 50-Day and 200-Day Moving Average
This Zacks Rank #3 (Hold) insurance broker closed at $290.39 on Wednesday, above its 50-day and 200-day simple moving average (SMA) of $283.06 and $264.71, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
WTW Earnings Surprise History
Willis Towers has a decent earnings surprise history. Its earnings beat estimates in each of the last four quarters with an average surprise of 7.06%.
WTW’s Growth Projection Encourages
The Zacks Consensus Estimate for Willis Towers’s 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.
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.
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%. The insurer continues to expect share repurchases to total approximately $750 million in 2024, subject to market conditions and other relevant factors.
Shares are Affordable
The stock is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 16.11, higher than the industry average of 21.83.
Concerns Regarding WTW
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.
Three out of the 11 analysts covering the stock have raised estimates for 2024 and 2025 over the past 60 days. Two analysts have lowered the estimates for both 2024 and 2025. The Zacks Consensus Estimate for PFG’s 2024 and 2025 earnings has moved 0.9% and 0.05% south, respectively, in the past 60 days.
WTW’s trailing 12-month ROE of 16.9% is weak when compared with the industry average of 32.3%, reflecting its inefficiency in using shareholders' funds.
Key Picks
Investors interested in the brokerage insurance industry may look at some better-ranked players like Marsh & McLennan Companies, Inc. (MMC - Free Report) , Ryan Specialty Holdings Inc. (RYAN - Free Report) and Cincinnati Financial Corporation (CINF - 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 8.1%, 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 15.7%.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 and 2025 earnings implies year-over-year growth of 31.1% and 21.9%, respectively. It beat earnings estimates in one of the past four quarters while matched in the other three, with an average surprise of 0.44%. In the past year, shares of RYAN have jumped 37%.
The Zacks Consensus Estimate for Cincinnati Financial’s 2024 and 2025 earnings implies year-over-year growth of 9.1% and 7%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 27.01%. In the past year, shares of CINF have climbed 28.5%.