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Willis Towers (WLTW) Misses on Q4 Earnings, Revenues Up Y/Y

Zacks Equity Research

Willis Towers Watson Public Limited Company WLTW delivered fourth-quarter 2018 adjusted earnings of $4.00 per share, missing the Zacks Consensus Estimate of $4.06. The bottom line surged 81% year over year.

The quarter witnessed strong top-line growth, margin expansion and sturdy cash flow.

Operational Update

Willis Towers Watson posted adjusted consolidated revenues of $2.4 billion, up 14.1% year over year, on a reported basis. The metric grew 5% on organic basis. The top line missed the Zacks Consensus Estimate by 0.2%.

Total cost of providing services decreased 4.8% year over year to $1.9 billion.

Adjusted EBITDA was $774 million. Adjusted EBITDA margin was 32.6%.

Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise

Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise | Willis Towers Watson Public Limited Company Quote

Full year Highlights

Operating income was $9.73 per share on revenues of $8.5 billion.

Revenues increased 4% on a reported basis. Organic growth was 5%.

Adjusted EBITDA was $2 billion and adjusted EBITDA margin was 23.9%.

Quarterly Segment Update

Human Capital & Benefits: Total revenues of $843 million were up 10% year over year. Operating margin was 30%.

Corporate Risk & Broking: Total revenues of $816 million improved 3% year over year. Operating margin was 29% in the quarter under review.

Investment, Risk & Reinsurance: Total revenues of $280 million declined 3% from the prior-year quarter. Operating margin was 2%.

Benefits Delivery & Administration: Total revenues of $390 million surged 101% year over year. Operating margin was 61%.

Financial Update

Cash and cash equivalents increased 0.3% from the 2017-end level to about $1 billion.

Long-term debt increased 1.4% from 2017 end to nearly $4.4 billion at 2018-end.

Shareholders’ equity dipped 2.7% from the level on Dec 31, 2017 to $909 billion as of Dec 31, 2018.

For 2018, cash from operations improved 49% year over year to $1.3 billion. For 2018, free cash flow was $1 billion, up 81% year over year.

The company bought back shares worth $602 million in 2018.

2019 Guidance

Willis Towers estimates about 4% organic revenue growth. Adjusted operating margin should hover around 20%.

Adjusted earnings are projected in the range of $10.60-$10.85 per share, whose mid-point of $10.73 is below the current Zacks Consensus Estimate of $10.98 for 2019. Forex is estimated to drag down the bottom line by 10 cents.

Free cash flow is expected to grow at least 15%.

Zacks Rank

Willis Towers currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other insurance brokers that have reported fourth-quarter earnings so far, Aon Plc AON and Arthur J. Gallagher & Co. AJG beat the respective Zacks Consensus Estimate while Brown & Brown, Inc. BRO missed the same.

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