Should You Retain Willis Towers (WLTW) in Your Portfolio?

Willis Towers Watson Public Limited Company WLTW has been benefiting from new business activity, acquisitions and a strong balance sheet.

Growth Projections

The Zacks Consensus Estimate for 2021 and 2022 earnings per share is pegged at $12.70 and $13.71, indicating year-over-year increases of 8.5{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8} and 7.9{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}, respectively.

Estimate Revision

The Zacks Consensus Estimate for both 2021 and 2022 moved 0.8{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8} north in the past 30 days. This should instill investors’ confidence in the stock.

Earnings Surprise History

Willis Towers has a decent earnings surprise history. It beat estimates in each of the last four quarters, the average being 7.72{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}.

Zacks Rank & Price Performance

The company currently carries a Zacks Rank #3 (Hold). In the past year, the stock has rallied 19{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8} compared with the industry’s growth of 27.1{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}.

Zacks Investment Research

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Business Tailwinds

The Health and Benefits segment of the insurer should gain from advisory services across various lines of business, global benefit management and local brokerage appointments outside North America.

Technology and Administration Solutions is likely to perform better, with increased project work and new business activity in Great Britain.

Continued expense-reduction efforts are expected to increase the operating margin of the Health Capital & Benefits segment (“HCB”). The long-term perspective on HCB remains positive.

The Benefits Delivery & Administration (“BDA”) segment is likely to gain from the individual marketplace, primarily by TRANZACT, growth in Medicare Advantage products, and the Benefits Outsourcing business, which was mostly driven by an expanded client base. For 2021, Willis Towers expects positive momentum for the BDA business.

The insurance broker pursues buyouts to expand its geographical footprint and boost its product portfolio.

In the first quarter of 2020, Willis Towers 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.

Moreover, the company boasts strong capital and liquidity position. The company’s debt to capital of 30.6{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8} betters the industry average of 47.6{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}. This provides it the flexibility to raise additional debt. Its times interest earned of 8.3 compares favorably with the industry average of 7.7, which implies that its earnings are sufficient to cover its interest obligations.

Riding on a solid capital position, Willis Towers has been hiking dividends, which witnessed an nine-year CAGR (2013-2021) of 12.3{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}. Its dividend yield of 1.2{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8} appears attractive compared with the industry average of 1.1{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}.

Stocks to Consider

Some better-ranked stocks from the insurance sector are Marsh & McLennan Companies, Inc. MMC and Alleghany Corporation Y, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The bottom line of Marsh & McLennan surpassed estimates in each of the last four quarters, the average being 12.01{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}.

Alleghany’s earnings surpassed estimates in each of the last four quarters, the average being 128.63{9141277137bc5453450963fdb680487676d6442ace802d3de9e3808585508df8}.

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