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Willis Towers Set to Grow on Rising Commissions and Fees

Zacks Equity Research

Willis Towers Watson Public Limited Company WLTW is poised for growth banking on operational efficiencies, investment in new growth avenues and effective capital deployment. The company has a decent surprise history having delivered average four-quarter beat of 4.73%.

Organic growth in commissions and fees is a major component of Willis Towers’ revenues that continues to be robust. Willis Towers projects constant currency revenue growth to be around 4% in 2019. Organic growth across segments, significant contribution from acquisitions, geographic diversification and solid customer retention levels and growing new business should help to retain the growth momentum.

Willis Towers’ exchange business continues to retain solid momentum. The company maintains a robust 2019 sales pipeline in both middle and large markets. For 2019, Willis Towers has already enrolled about 0.3 million lives and expects to enroll another 0.06 to 0.07 retirees in the rest of the year.

Willis Towers has been improving its liquidity while maintaining a solid balance sheet and steady cash flow.  This in turn helps in effective capital deployment. To that end, in February 2019, the board of directors approved an 8.3% dividend hike.

However, Willis Towers’ operating expenses have been increasing over the last several quarters, leading to contraction of margins. Also, increasing debt level over the last few years has been increasing interest expense. Moreover, the company expects forex to drag down 2019 adjusted EPS by 10 cents per share. The company estimates adjusted operating margin to be around 20%.

Stocks That Warrant a Look

Some stocks form the brokerage insurance space that warrant a look are eHealth, Inc. EHTH, Brown & Brown, Inc. BRO and Erie Indemnity Company ERIE.

eHealth provides private health insurance exchange services to individuals, families, and small businesses in the United States and China. The company delivered positive four quarter average surprise of 127.73%.

Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands.  The company delivered positive four quarter average surprise of 4.56%.

Erie Indemnity operates as a managing attorney-in-fact for the subscribers at the Erie Insurance Exchange in the United States. The company delivered positive four quarter average surprise of 8.97%.

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Erie Indemnity Company (ERIE) : Free Stock Analysis Report
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