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Why Should You Hold Willis Towers Watson (WLTW) Stock?

Shares of Willis Towers Watson plc WLTW have outperformed the Zacks categorized  Insurance Brokerage industry, year to date. The company has also witnessed estimate revisions over the last 60 days. The Zacks Rank #3 (Hold) insurance broker’s prospect remains promising, banking on a number of growth drivers.

An Outperformer: Willis Towers Watson’s shares have rallied 18.96% year to date, outperforming the Zacks categorized Insurance Brokerage industry’s gain of 13.98%. The shares have also outperformed the S&P 500, rising 8.34% over the same time frame.

Positive Earnings Surprise History: Willis Towers Watson has surpassed the Zacks Consensus Estimate in the last five quarters. The company has delivered an average positive earnings surprise of 11.1%.

Positive Growth Projections: The Zacks Consensus Estimate for earnings is $8.51 for 2017 on revenues of $8.07 billion. While the topline translates to a year-over-year increase 2.7%, the bottom line reflects a 6.87% improvement. For 2018, the Zacks Consensus Estimate for earnings is pegged at $9.76 on $8.36 billion revenues. While earnings represents 14.76% increase, revenues translates to a 3.51% rise.

Willis Towers Watson has long-term expected earnings per share growth of 9.80%.

Upward Estimate Revisions: The Zacks Consensus Estimate for 2017 moved up nearly 1% in the last 60 days, while the same for 2018 scaled up 0.4% over the same time frame.

Upbeat Guidance: Willis Towers Watson’s projects constant currency revenue growth of 2–3% in 2017. Adjusted EPS is projected between $8.40 and $8.55. Merger-related cost savings are estimated at $30 million in 2017. Willis Towers projects additional savings of about $95 million in 2017 from Operational Improvement Program. It targets $0.5 billion worth shares repurchases in 2017.

Growth Drivers in Place: Commissions and fees have been witnessing a sustained improvement on the strength of organic growth across segments besides a rich contribution from acquisitions. Customer retention level remains strong and new businesses are growing. Willis Towers Watson’s exchange business retains a solid momentum. Notably, the sales pipeline remains strong, especially in the mid-market for 2017.

With respect to costs savings, the insurance broker targets cost synergies at a high end of $100–$125 million by 2018. This should continue to aid margin expansion. Its Operational Improvement Program is expected to help it meet 25% adjusted EBITDA margin goal by 2018.

Willis Towers Watson effectively deploys its capital. While the company has $975 million remaining under its share repurchase authorization, it targets a dividend payout ratio of about 25%.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Aon plc AON, State National Companies, Inc. SNC and Progressive Corp. PGR

Progressive provides personal and commercial property-casualty insurance, plus other specialty property-casualty insurance and related services primarily in the United States. The company has delivered positive surprises in two of the last four quarters with an average beat of 4.95%. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

State National Companies provides property and casualty insurance in the United States. The company has delivered positive surprises in two of last four quarters with an average beat of 20.54%. The stock flaunts a Zacks Rank #1.

Aon offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services worldwide. The company has delivered positive surprises in two of the last four quarters with an average beat of 4.04%.The stock carries a Zacks Rank #2 (Buy).

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Aon PLC (AON): Free Stock Analysis Report
Willis Towers Watson Public Limited Company (WLTW): Free Stock Analysis Report
Progressive Corporation (The) (PGR): Free Stock Analysis Report
State National Companies, Inc. (SNC): Free Stock Analysis Report
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