Willis Towers Watson (WLTW) Down 4.4% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Willis Towers Watson (NASDAQ:WLTW). Shares have lost about 4.4% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Willis Towers Watson due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Willis Towers Q4 Earnings Top Estimates, Improve Y/Y

Willis Towers Watson delivered fourth-quarter 2019 adjusted earnings of $4.90 per share, surpassing the Zacks Consensus Estimate of $4.85 by 1%.
The quarter under discussion witnessed organic revenue growth.

Also, the bottom line improved 22.5% from the year-ago figure on the back of higher segmental revenue contributions.

Operational Update

Willis Towers Watson posted adjusted consolidated revenues of $2.69 million, up 13% year over year. Moreover, the metric grew 5% on organic basis. The top line also beat the Zacks Consensus Estimate by 2.2%.

Total cost of providing services increased 5.3% year over year to $2 billion.

Adjusted EBITDA for the fourth quarter was $930 million, up 20.2% year over year.

Adjusted operating income surged 24.5% year over year to $809 million in the reported quarter.

Quarterly Segment Update

Human Capital & Benefits: Total revenues of $865 million were up 3% year over year. Operating margin was 30.1% for the quarter under review.

Corporate Risk & Broking: Total revenues of $877 million improved 7% year over year. Operating margin was 30.3% in the quarter under review.

Investment, Risk & Reinsurance: Total revenues of $314 million was up 12% from the prior-year quarter’s number. Operating margin was 9.1%.

Benefits Delivery & Administration: Total revenues of $595 million soared 53% year over year. Operating margin was 52.4%.

Financial Update

Cash and cash equivalents decreased 14.1% to $887 million from the 2018-end level.

Long-term debt increased 20.8% from the level at 2018 end to nearly $5.3 billion at the reported quarter-end.

Shareholders’ equity increased 4% from the level on Dec 31, 2018 to $10.4 billion as of Dec 31, 2019.

For 2019, cash from operations declined 16% year over year to $1.08 billion.

For the same period, free cash flow was $835 million, down 18% year over year.

The company bought back shares worth $3 million in the quarter under review.

Full-Year Update

For the full year, the company repurchased shares worth $150 million.

For the year ended Dec 31, 2019, revenues were $9.04 billion, up 6% year over year.

Adjusted earnings per share came in at $10.96, up 12.6% year over year.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

Currently, Willis Towers Watson has a nice Growth Score of B, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Willis Towers Watson has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.