雅虎香港財經 Here's Why Willis Towers (WTW) Stock is Worth Retaining
Willis Towers Watson plc WTW is set to gain from new business, strategic acquisitions, geographic diversification, solid customer retention levels and a strong capital position. These, along with solid growth projections, make the stock worth retaining.
This Zacks Rank #3 (Hold) insurance broker has a decent record of delivering earnings surprises. It beat estimates in three of the last four quarters and missed in one, with the average surprise being 0.63%. Earnings increased 8.2% in the last five years.
An Outperformer
Shares have gained 13.3% year to date, compared with the industry’s rise of 8.4%.
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Optimistic Growth Projection
The Zacks Consensus Estimate for 2024 earnings is pegged at $16.28, indicating an increase of 12.4% on 4.9% higher revenues of $10 billion. The consensus estimate for 2025 earnings is pegged at $18.28, indicating a rise of 12.3% on 5.2% higher revenues of $10.5 billion.
The expected long-term earnings growth rate is currently pegged at 10.8%. We expect 2026 EPS to witness a three-year CAGR of 6.9%.
Northbound Estimate Revision
The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1 cent and 2 cents north, respectively, in the past 30 days, reflecting analyst optimism.
Growth Drivers
WTW’s 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. We expect the 2026 top line to witness a three-year CAGR of 4.7%.
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.
The company thus remains committed to delivering mid-single-digit organic revenue growth of more than $9.9 billion and adjusted operating margin in the range of 22.5-23.5% in 2024. The insurance broker projects to deliver approximately $425 million of cumulative run-rate savings from the Transformation program by the end of 2024.
Solid operational performance ensures smooth cash flow. WTW has modified its target of generating $4.3-$5.3 billion in cumulative free cash flow between 2022 and 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 increased at a five-year CAGR of 6.2% and currently yields 1.3%. The insurer targets $750 million of share repurchases in 2024.
Risks
Despite the upside potential, there are a few factors that investors should keep an eye on. WTW has been experiencing an increase in expenses that weigh on margin expansion. We expect expenses to increase 3.7% in 2024.
An increase in debt has induced higher interest expense. While the debt-to-capital ratio has deteriorated, times interest earned remains poor compared with the industry average.
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.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Palomar Holdings PLMR, ProAssurance PRA and Brown and Brown BRO.
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings implies 371.4% and 71.6% year-over-year growth, respectively. It sports a Zacks Rank #1.
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 28.5% and 8% increase year over year.
BRO delivered a four-quarter average earnings surprise of 11.90%. Shares of BRO have risen 28.6% year to date. It carries a Zacks Rank #2 (Buy).
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ProAssurance Corporation (PRA) : Free Stock Analysis Report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report
Palomar Holdings, Inc. (PLMR) : Free Stock Analysis Report
