BMO Capital maintained a Market Perform rating on Willis Towers Watson (NASDAQ:WTW) with a steady price target of $298.00. The firm's analyst cited adjustments to forward earnings per share (EPS) estimates, which were decreased by 2% for 2024 and 5% for 2025. The revisions were primarily due to weaker Health and Wealth Consulting (HWC) margins and a slightly higher anticipated tax rate.
In the second half of 2024 and beyond, BMO Capital's adjusted operating income forecasts for Willis Towers Watson are approximately 7% for the second half of 2024, 4% for 2025, and 2% for 2026 below the consensus. This difference is believed to stem from BMO Capital's decision to exclude contributions from TRANZACT starting in the third quarter of 2024 from their projections.
Further adjustments were made by the firm to certain items below the operating line. Notably, BMO Capital has incorporated a $1.8 billion pre-tax impairment charge related to TRANZACT in their third-quarter 2024 estimates. This charge is expected to impact the company's financials during that period.
The analyst's comments and the maintained price target reflect a cautious outlook for Willis Towers Watson's future earnings, considering both operational challenges and specific financial adjustments. The detailed forecast adjustments provide a more conservative stance compared to the broader market consensus.
In other recent news, Willis Towers Watson has been a subject of several significant developments. The company is set to finalize the sale of its TRANZACT operation to GTCR and Recognize for $632 million by the end of the year, which is expected to result in a significant charge estimated between $1.6 billion and $2.1 billion in the third quarter. The company has also acquired a stake in UK-based wealth management firm atomos, strengthening its position in the UK's wealth market. In addition, Willis Towers Watson has formed a co-brokerage partnership with The J. Morey Company to offer risk management solutions to North American companies with headquarters in Japan.
On the analyst front, BMO Capital has maintained its Market Perform rating on Willis Towers Watson with a steady price target of $298.00. This comes as the firm adjusts its forward earnings per share estimates for the insurance broker, taking into account the upcoming sale of TRANZACT. Wells Fargo has given Willis Towers Watson an Overweight rating, increasing its price target from $321.00 to $334.00 in anticipation of potential growth catalysts.
InvestingPro Insights
To complement BMO Capital's analysis of Willis Towers Watson (NASDAQ:WTW), InvestingPro data offers additional context. The company's market capitalization stands at $29.57 billion, with a P/E ratio of 27.44, indicating a premium valuation. This aligns with an InvestingPro Tip suggesting that WTW is "Trading at a high P/E ratio relative to near-term earnings growth," which could explain BMO's cautious stance.
Despite the challenges highlighted in the article, WTW has shown resilience in its dividend policy. An InvestingPro Tip notes that the company "Has raised its dividend for 7 consecutive years" and "Has maintained dividend payments for 22 consecutive years." This consistent dividend history may provide some reassurance to investors amidst the projected earnings adjustments.
The company's revenue growth of 6.7% over the last twelve months and an EBITDA growth of 9.82% demonstrate ongoing business expansion, albeit potentially at a slower pace than some analysts expect. This performance, coupled with the fact that "Analysts predict the company will be profitable this year," according to another InvestingPro Tip, suggests that while there may be near-term pressures, the company maintains a solid financial foundation.
For investors seeking a more comprehensive analysis, InvestingPro offers 6 additional tips for Willis Towers Watson, providing a broader perspective on the company's financial health and market position.
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