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Willis Towers (WLTW) Q3 Earnings & Revenues Top Estimates

Tanuka De

Willis Towers Watson Public Limited Company WLTW delivered third-quarter 2019 adjusted earnings of $1.31 per share, which beat the Zacks Consensus Estimate of $1.30.  The bottom line declined 0.8% year over year.

The company witnessed strong total and organic revenue growth and continued margin expansion.

Operational Update

Willis Towers Watson posted adjusted consolidated revenues of $1.99 billion, up 7% year over year on a reported basis. Revenues increased 6% on an organic basis. The top line marginally beat the Zacks Consensus Estimate of $1.98 billion.

Total cost of providing services decreased 2.2% year over year to $1.9 billion.

Adjusted operating income was $299 million, up 15.9% year over year.  Adjusted operating margin expanded 120 basis points (bps) to 11.6% driven by enhanced margin performance across all segments.

Adjusted EBITDA was $344 million, up 9.9% year over year. Adjusted EBITDA margin was 17.3%, up 50 basis points (bps).

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 price-consensus-eps-surprise-chart | Willis Towers Watson Public Limited Company Quote

 

Quarterly Segment Update

Human Capital & Benefits: Total revenues of $807 million were up 6% year over year both on constant currency and organic basis. Organic growth reflects increased consulting and brokerage services, growth in specialty products in North America, and expansion of its client portfolio outside North America for both local and global appointments. Operating margin was 27%, reflecting an increase of 200 bps.

Corporate Risk & Broking: Total revenues of $651 million improved 7% year over year both on constant currency and organic basis. The segment witnessed solid growth across all geographies. Operating margin was 12% in the quarter under review, up 100 bps.

Investment, Risk & Reinsurance: Total revenues of $325 million increased 5% from the prior-year quarter on a constant basis and 3% on an organic basis. All lines of business contributed to the segment’s strong performance.  Operating margin was 9.3%, up 20 bps.

Benefits Delivery & Administration: Total revenues of $179 million improved 42% on a constant currency basis and 2% on an organic basis, driven by continued expansion of its client base and increased demand for project work in the mid-market and large-market spaces. Operating margin was negative 12% compared with negative 26% in the year-ago quarter.

Financial Update

Cash and cash equivalents decreased 16.1% from the 2018-end level to about $867 million at third-quarter 2019 end.

Long-term debt decreased 22.6% from 2018 end to nearly $5.4 billion at quarter-end. The company completed $1 billion bond offering to proactively manage capital structure.

Shareholders’ equity increased 0.4% from the level on Dec 31, 2018 to $9.9 billion as of Sep 30, 2019.

Cash flow from operations was $620 million in the first nine months of 2019, down 13.4% year over year. Free cash flow was $445 million, down nearly 12.2% year over year.

The company bought back shares worth $147 million in the first nine months of 2019.

Zacks Rank

Willis Towers currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurance Brokers

Third-quarter earnings of Arthur J. Gallagher AJG and Aon Plc AON beat the Zacks Consensus Estimate while that of Brown & Brown BRO were in line with the consensus mark.

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