On Thursday, Raymond (NS:RYMD) James elevated its stance on Willis Towers Watson (NASDAQ:WTW), transitioning the stock rating from Outperform to Strong Buy and increasing the price target to $400 from the previous $365.
The stock, currently trading at $332.53, has shown remarkable momentum with a 32% gain over the past six months. According to InvestingPro analysis, WTW is trading near its 52-week high of $334.49, with analyst targets ranging from $302 to $381.
The decision follows the company's successful implementation of its Grow, Simplify, and Transform strategy, which resulted in significant organic revenue growth, cost savings of $450 million, and an adjusted operating margin improvement of 310-360 basis points over the period from 2021 to 2024.
Earlier this week, at the Investor Day, Willis Towers Watson's management unveiled a new strategy aimed at further accelerating performance, enhancing efficiency, and continuing portfolio optimization. The company, now valued at $33.49 billion, has maintained dividend payments for 22 consecutive years, demonstrating consistent shareholder returns.
InvestingPro subscribers can access detailed analysis of WTW's financial health score and comprehensive Pro Research Reports, offering deeper insights into the company's strategic initiatives. The company anticipates mid-single digit organic growth and margin expansion in the Health, Wealth, and Career (HWC) segment for the fiscal year 2025, as well as mid-to-high single digit organic growth with a 100 basis point margin expansion annually over the next three years in the Risk and Broking (R&B) segment.
Based on these strategic developments and projections, Raymond James now expects Willis Towers Watson to potentially match or exceed its peers in organic results and margin improvement rates.
Consequently, the firm has revised its operating EPS estimates for the company upwards to $17.55 for 2025 and $18.55 for 2026, up from the earlier projections of $17.30 and $18.40, respectively.
These estimates take into account the divestiture of Tranzact and anticipate continued adjusted EBITDA margin expansion and improved free cash flow conversion rates in both 2025 and 2026.
Despite the positive outlook, Raymond James noted potential risks that include quarterly fluctuations in organic growth and margin gains, uncertainties surrounding pension liabilities, and possible changes in global tax rates in the near term.
InvestingPro data indicates the stock's RSI suggests overbought conditions, while technical indicators and additional ProTips are available to help investors navigate these risks effectively. Additionally, management's expectation to bolster growth through inorganic opportunities could introduce distractions.
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