A month has gone by since the last earnings report for Willis Towers Watson . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Willis Towers Watson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Willis Towers Beats on Q3 Earnings, Revises View
Willis Towers Watson delivered third-quarter 2018 adjusted earnings of $1.32 per share, surpassing the Zacks Consensus Estimate of $1.11 by 18.9%.
The quarter under discussion witnessed organic revenue growth as well as a consistent margin expansion.
Also, the bottom line improved 17.9% from the year-ago quarter’s figure.
Operational Update
Willis Towers Watson posted adjusted consolidated revenues of $1.9 million, flat year over year on a reported basis. However, the metric grew 5% on organic basis. Meanwhile, the top line missed the Zacks Consensus Estimate by 1.3%.
Total cost of providing services slipped 1.9% year over year to $1.8 billion.
Adjusted EBITDA was $313 million, down 2.8% year over year. Adjusted EBITDA margin was 16.8%.
Adjusted operating income declined 11.8% year over year to $194 million in the reported quarter.
Quarterly Segment Update
Human Capital & Benefits: Total revenues of $778 million were up 6%. Operating margin was 25%.
Corporate Risk & Broking: Total revenues of $622 million improved 4% year over year. Operating margin was 11% in the quarter under review.
Investment, Risk & Reinsurance: Total revenues of $317 million slid 1% from the prior-year quarter’s number. Operating margin was 9%.
Benefits Delivery & Administration: Total revenues of $217 million plunged 30% year over year. Operating margin was (26%).
Financial Update
Cash and cash equivalents decreased 9.6% to $931 million from the 2017-end level.
Long-term debt inched up 1.1% from the level at 2017 end to nearly $4.5 billion at the reported quarter-end.
Shareholders’ equity dipped 0.8% from the level on Dec 31, 2017 to $10 billion as of Sep 30, 2018.
For the first nine months ended Sep 30, 2018, cash from operations improved 39% year over year to $716 million. For the same period this year, free cash flow was $507 million, up 60% year over year.
The company bought back shares worth $132 million in the quarter under review.
2018 Guidance
Willis Towers projects adjusted earnings per share between $10.12 and $10.32 in 2018, up from the earlier outlook of $9.88-$10.12. Constant currency revenue growth is estimated at around 3% while a 4% rise is anticipated on organic basis.
The company projects tax rate between 20% and 21% (down from the earlier guided range of 22-23%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Willis Towers Watson has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Willis Towers Watson has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Image: Bigstock
Willis Towers Watson (WLTW) Up 11.4% Since Last Earnings Report: Can It Continue?
A month has gone by since the last earnings report for Willis Towers Watson . Shares have added about 11.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Willis Towers Watson due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Willis Towers Beats on Q3 Earnings, Revises View
Willis Towers Watson delivered third-quarter 2018 adjusted earnings of $1.32 per share, surpassing the Zacks Consensus Estimate of $1.11 by 18.9%.
The quarter under discussion witnessed organic revenue growth as well as a consistent margin expansion.
Also, the bottom line improved 17.9% from the year-ago quarter’s figure.
Operational Update
Willis Towers Watson posted adjusted consolidated revenues of $1.9 million, flat year over year on a reported basis. However, the metric grew 5% on organic basis. Meanwhile, the top line missed the Zacks Consensus Estimate by 1.3%.
Total cost of providing services slipped 1.9% year over year to $1.8 billion.
Adjusted EBITDA was $313 million, down 2.8% year over year. Adjusted EBITDA margin was 16.8%.
Adjusted operating income declined 11.8% year over year to $194 million in the reported quarter.
Quarterly Segment Update
Human Capital & Benefits: Total revenues of $778 million were up 6%. Operating margin was 25%.
Corporate Risk & Broking: Total revenues of $622 million improved 4% year over year. Operating margin was 11% in the quarter under review.
Investment, Risk & Reinsurance: Total revenues of $317 million slid 1% from the prior-year quarter’s number. Operating margin was 9%.
Benefits Delivery & Administration: Total revenues of $217 million plunged 30% year over year. Operating margin was (26%).
Financial Update
Cash and cash equivalents decreased 9.6% to $931 million from the 2017-end level.
Long-term debt inched up 1.1% from the level at 2017 end to nearly $4.5 billion at the reported quarter-end.
Shareholders’ equity dipped 0.8% from the level on Dec 31, 2017 to $10 billion as of Sep 30, 2018.
For the first nine months ended Sep 30, 2018, cash from operations improved 39% year over year to $716 million. For the same period this year, free cash flow was $507 million, up 60% year over year.
The company bought back shares worth $132 million in the quarter under review.
2018 Guidance
Willis Towers projects adjusted earnings per share between $10.12 and $10.32 in 2018, up from the earlier outlook of $9.88-$10.12. Constant currency revenue growth is estimated at around 3% while a 4% rise is anticipated on organic basis.
The company projects tax rate between 20% and 21% (down from the earlier guided range of 22-23%).
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
VGM Scores
At this time, Willis Towers Watson has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Willis Towers Watson has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.