Should You Retain Willis Towers (WTW) in Your Portfolio?
Willis Towers Watson Public Limited Company WTW has been benefiting from growing healthcare premiums, increased consulting work and software sales, strategic buyouts and effective capital deployment.
Growth Projections
The Zacks Consensus Estimate for Willis Towers’ 2023 earnings is pegged at $13.90 per share, indicating a 3.65% increase from the year-ago reported figure on 5.3% higher revenues of $9.34 billion. The consensus estimate for 2024 earnings is pinned at $15.90 per share, indicating a 14.4% increase from the year-ago reported figure on 5.5% higher revenues of $9.86 billion.
Zacks Rank & Price Performance
Willis Towers currently has a Zacks Rank #3 (Hold). The stock has gained 5.4% compared with the industry’s growth of 24.9% in the past year.
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Business Tailwinds
The Health, Wealth & Career segment is expected to gain from higher demand for products and advisory work, new client appointments and growing healthcare premiums. Increased consulting work, strong client demand for talent and compensation products and employee engagement offerings are also likely to add to the upside.
The Corporate Risk and Broking segment is expected to gain from double-digit growth across the global lines of business, notably in Aerospace, Natural Resources and FINEX, improved client retention as well as strong contributions from both construction and M&A solutions. Increased software sales and advisory work should continue to drive the Insurance Consulting and Technology business.
Willis Towers’ growth strategy focuses on core opportunities with the highest growth and returns. The broker innovated and developed its offerings in markets and boosted its abilities in faster-growth markets. Strategic buyouts add to the upside apart from expanding its geographical footprint, increasing capabilities and strengthening its portfolio.
The company has been improving its liquidity while maintaining a solid balance sheet. WTW has sufficient cash reserves to meet its short-term debt obligations. It expects approximately 12% free cash flow margin for 2023.
Looking beyond 2023, Willis Towers expects free cash flow margin to increase due to improved cash conversion in TRANZACT business and the abatement of transformation-related spend. This expansion in free cash flow margin on top of expected organic revenue growth should drive strong long-term growth in free cash flow.
Solid balance sheet and steady cash flow are expected to help the company engage in capital deployment for buybacks, dividend payouts, debt repayments, acquisitions and investments that drive and support growth.
The company remains committed to enhancing its shareholders value. Its dividend witnessed an eight-year (2016-2023) CAGR of nearly 7.2%. As of Jun 30, 2023, approximately $889 million remained on the current repurchase authority.
WTW remains focused on deploying excess capital and cash flow into share repurchases. With a solid financial position, it intends to continue to reward its shareholders, technology and new business opportunities and pursue opportunistic mergers and acquisitions.
Stocks to Consider
Some better-ranked stocks from the property and casualty insurance industry are Axis Capital Holdings Limited AXS, Chubb Limited CB and Cincinnati Financial Corporation CINF. While Axis Capital sports a Zacks Rank #1 (Strong Buy), Chubb and Cincinnati Financial carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axis Capital has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 9.75%. In the past year, AXS has gained 17.2%.
The Zacks Consensus Estimate for AXS’ 2023 and 2024 earnings per share is pegged at $8.41 and $9.31, indicating a year-over-year increase of 44.7% and 10.7%, respectively.
Chubb has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 3.36%. CB has climbed 16.7% in the past year.
The Zacks Consensus Estimate for CB’s 2023 and 2024 earnings per share is pegged at $18.18 and $19.86, indicating a year-over-year increase of 19.2% and 9.2%, respectively.
Cincinnati Financial has a solid track record of beating earnings estimates in three of the last four quarters and missing in one, the average being 25.25%. In the past year, CINF has gained 15.8%.
The Zacks Consensus Estimate for CINF’s 2023 and 2024 earnings per share is pegged at $5 and $5.88, indicating a year-over-year increase of 17.9% and 17.6%, respectively.
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Chubb Limited (CB) : Free Stock Analysis Report
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Axis Capital Holdings Limited (AXS) : Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report
