Willis Towers Watson Public Limited Company WTW shares have gained 28.3% in the past year compared with the industry’s growth of 26.7%. Currently priced at $314.40, the stock is a little below its 52-week high of $320.77. This proximity underscores investor confidence and market optimism about this insurance company’s prospects.
WTW Outperforms Industry in a Year
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WTW has a solid surprise history. The insurance broker surpassed earnings estimates in each of the last four quarters, the average being 7.34%.
WTW Trading Above 50-Day & 200-Day Moving Average
The stock is trading above its 50-day and 200-day simple moving average (SMA) of $298.55 and $276.07, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
Willis Towers’ Growth Projection Encourages
The Zacks Consensus Estimate for Willis Towers’ 2024 earnings per share indicates a year-over-year increase of 15.2%. The consensus estimate for revenues is pegged at $9.94 billion, implying a year-over-year improvement of 4.8%.
The consensus estimate for 2025 earnings per share and revenues indicates a year-over-year increase of 10.1% and 5.5%, respectively, from the corresponding 2024 estimates.
Positive Analyst Sentiment Instills Confidence in WTW
Eight of the 11 analysts covering the stock have raised estimates for 2024 while four of the eight analysts have raised the same for 2025 over the past 30 days. The Zacks Consensus Estimate for 2024 and 2025 increased 1.2% and 0.7%, respectively.
Shares are Affordable
This Zacks Rank #3 (Hold) insurance broker is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 17.25, lower than the industry average of 22.46.
Factors Acting in Favor of WTW
Willis Towers’ growth strategy encompasses a focus on improving operating margins, increasing free cash flow conversion and driving sustainable revenue growth. Focus on core opportunities with the highest growth and return, which include gaining market share in Risk and Broking and Individual Marketplace, should spur long-term growth and return more value to shareholders.
Well-performing Health, Wealth & Career and Risk & Broking segments, driven by solid customer retention levels, growing new business and geographic diversification, continue to fuel the top line. Most of the company's operating regions experienced revenue growth for 15 straight quarters.
Strategic acquisitions have expanded its geographical footprint in the last few years in countries like Italy, Canada, the U.K. and France, as well as ramped up its product portfolio.
Solid operational performance ensures smooth cash flow. WTW continues to expect a year-over-year improvement in free cash flow margin in 2024.
Distribution of Wealth
Banking on its capital position, WTW distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has witnessed a five-year CAGR (2019-2024) of 6.2%. The insurer expects share repurchases to total approximately $900 million in 2024, subject to market conditions and other relevant factors.
Headwinds
Despite the upside potential, Willis Towers’ expenses have been rising over the last several quarters. Higher salary expenses, incentive costs, improved non-income-related tax expenses and marketing costs, higher restructuring costs, as well as increased consulting and compensation costs related to the Transformation program result in the contraction of margins.
WTW’s trailing 12-month ROE of 18.5% is weak when compared with the industry average of 30.9%, reflecting its inefficiency in using shareholders' funds.
Key Picks
Investors interested in the insurance industry may look at some better-ranked players like Abacus Life, Inc. ABL, Manulife Financial Corp MFC and Primerica, Inc. PRI, 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 Zacks Consensus Estimate for Abacus Life’s 2024 and 2025 earnings implies year-over-year growth of 19.2% and 22.4%, respectively. The Zacks Consensus Estimate for 2024 and 2025 revenues implies year-over-year growth of 33.1% and 57%, respectively. In the past year, shares of ABL have risen 6.2%.
The Zacks Consensus Estimate for Manulife Financial’s 2024 and 2025 earnings implies year-over-year growth of 6.6% and 9.2%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 5.36%. In the past year, shares of MFC have risen 68.3%.
The Zacks Consensus Estimate for Primerica’s 2024 and 2025 earnings implies year-over-year growth of 18.9% and 7.9%, respectively. It beat earnings estimates in two of the past four quarters and missed in two, with an average surprise of 4.89%. In the past year, shares of PRI have climbed 40.8%.
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Free: See Our Top Stock And 4 Runners UpManulife Financial Corp (MFC) : Free Stock Analysis Report
Primerica, Inc. (PRI) : Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WTW) : Free Stock Analysis Report
Abacus Life, Inc. (ABL) : Free Stock Analysis Report
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