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Here's Why Hold Strategy is Apt for Willis Towers' (WLTW) Stock

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Zacks Equity Research
·3 min read
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Willis Towers Watson Public Limited Company WLTW is well-poised for growth, driven by technology sales, expansion of client portfolio, mergers and acquisitions, and a robust capital position.

The Zacks Consensus Estimate for 2021 earnings per share is pegged at $12.17, indicating a year-over-year increase of 5.8%.

It has a decent earnings surprise history too. Its earnings beat estimates in the last four quarters. Willis Towers has a trailing four-quarter earnings surprise of 5.61%, on average.

Insurance Consulting and Technology revenues benefited from technology sale, while investment revenues continue to gain from expansion of the delegated investment services portfolio under the Investment, Risk & Reinsurance (IRR) segment of Willis Towers.

Given higher consulting and brokerage services, continued expansion of client portfolio for both local and global appointments, increased project work primarily in Great Britain and Western Europe, elevated demand in Data Services and advisory work across all geographies, the Human Capital and Benefits (HCB) segment is expected to see an improvement in the near term.

The insurance broker pursues strategic mergers and acquisitions to expand its geographical footprint and strengthen its product portfolio. The acquisition of TRANZACT in July 2019 consolidated Willis Towers Watson’s position as the leader in the growing Medicare market space. In the first quarter of 2020, the company has agreed to be acquired by Aon plc AON, which will enable it to more proactively support clients in developing solutions to problems that are inadequately managed today. This combination is expected to take progressive actions and implement systemic changes that will have both immediate and long-term impacts in navigating new forms of volatility, building a resilient workforce and rethinking access to capital.

During this time of economic challenge and uncertainty, the insurer continues to maintain disciplined expense management by quickly reducing discretionary spending in order to preserve the margin profile sustainably.

Although the COVID-19 pandemic has weighed on the company, the insurer is well prepared to navigate the situation with a strong capital and liquidity position, and solid cash and cash equivalents. Also, it has access to the undrawn revolving credit facility of $1.25 billion. The company had no borrowings under its credit facility in the third quarter. Its free cash flow continues to benefit from the combination of prudent working capital management and a disciplined approach to managing spend.

Shares of this Zacks Rank #3 (Hold) insurance broker have gained 2.1% compared with the industry’s increase of 2.8% in the past year. Nevertheless, operational efficiencies and investments in new growth avenues are expected to drive shares in the near term.

Stocks to Consider

Some better-ranked stocks in the insurance space are American Financial Group, Inc. AFG and The Allstate Corporation ALL, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

American Financial surpassed estimates in three of the last four quarters. It has a trailing four-quarter earnings surprise of 5.85%, on average.

The Allstate surpassed estimates in the last four quarters. It has a trailing four-quarter earnings surprise of 38.59%, on average.

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The Allstate Corporation (ALL) : Free Stock Analysis Report
 
Aon plc (AON) : Free Stock Analysis Report
 
American Financial Group, Inc. (AFG) : Free Stock Analysis Report
 
Willis Towers Watson Public Limited Company (WLTW) : Free Stock Analysis Report
 
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