Willis Towers Gains From Organic Growth & Capital Deployment

Willis Towers Watson (NASDAQ:WLTW) is well poised for growth, courtesy of higher organic revenues from strong segmental performance along with strategic initiatives undertaken by the company.

The company has a decent surprise history. Willis Towers surpassed the Zacks Consensus Estimate in three of the last four quarters. It has trailing four-quarter positive earnings surprise of 0.7%, on average. The Zacks Consensus Estimate for current-quarter earnings has been revised nearly 1% upward in the past 30 days.

What’s Driving Willis Towers?

The company’s total revenues witnessed a CAGR rate of 18.9% in the 2014-2019 time frame. Willis Towers’ revenues continue to be driven by organic growth in its segments — Human Capital & Benefits; Corporate Risk & Broking; Investment, Risk & Reinsurance; and Benefits Delivery & Administration. Total organic growth came in at 5% in 2019, with Investment, Risk & Reinsurance segment achieving the highest organic growth of 7% among the four segments.

Willis Towers’ 2019 results also reflected the positive impact of organic growth. Evidently, the company delivered earnings per share of $10.96 in 2019, up 12.6% year over year.

The company seems to be in a bid to boost the top line through buyouts, collaborations and consistent upgrades to its existing solutions as well as capabilities. In January 2020, Willis Towers teamed up with eBaoTech to establish an insurance middle market platform to address the changing needs of digital insurance marketplace. Also, the company inked a deal to acquire Unity Group in December 2019. The deal showcases the company’s initiatives to expand offerings and strengthen its foothold in Central America. Such strategies bode well for the company.

Willis Towers also believes in boosting shareholders’ value via buybacks and dividend payouts on the back of its financial strength. The company raised its quarterly dividend by 5% to 68 cents per share in February compared with its prior payout of 65 cents.

However, rising debt levels have resulted in increased interest expenses, which is a significant headwind for the company.

Shares of this Zacks Rank #3 (Hold) brokerage firm have gained 8.4% in a year’s time compared with the industry’s rise of 10.9%.

Nevertheless, we believe that solid organic growth and effective capital deployment is expected to drive the company’s shares going forward.

Stocks to Consider

Some better-ranked stocks from the same space are eHealth, Inc. (NASDAQ:EHTH) , Brown & Brown, Inc. (NYSE:BRO) and Aon plc (NYSE:AON) . While eHealth sports a Zacks Rank #1 (Strong Buy), Brown & Brown and Aon plc carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth, Brown & Brown and Aon beat the Zacks Consensus Estimate for earnings in the last reported quarter by 65.86%, 3.7% and 1.61%, respectively.

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