Why You Should Hold Willis Towers (WLTW) Stock For Now

Shares of Willis Towers Watson plc (NASDAQ:WLTW) have outperformed the Zacks categorized Insurance Brokerage industry, year to date. While Willis Towers’ shares appreciated 16.75%, the industry gained 10.72%. Notably, the stock has also outperformed the S&P 500 over the same time frame. The estimates have also been revised upward over the last 30 days.

Willis Towers has been witnessing solid revenue growth on organic growth in commissions and fees. The Zacks Rank #3 (Hold) insurance broker projects constant currency revenue growth of 2–3% in 2017. Also, with respect to exchange, the company’s business retains a solid momentum. The company’s 2017 sales pipeline remains strong, especially in the mid-market. Management now expects organic revenue growth between 2% and 3%, while revenue synergies are likely to be heavily skewed into 2017 and 2018.

Willis Tower expects to achieve cost synergies at the high end of $100–$125 million by 2018. Merger-related cost savings are estimated at $30 million in 2017, which should aid margin expansion. Though the company will incur $140 million in restructuring costs in 2017 due its Operational Improvement Program, the same is expected to help it meet 25% adjusted EBITDA margin goal by 2018. Willis Towers projects additional savings of approximately $95 million in 2017.

The company also deploys capital effectively to enhance shareholders’ value via dividend increases and share buybacks. Willis Towers’ 10% dividend hike in Feb 2017 should enable it to maintain the targeted dividend payout ratio of about 25%. The company also has $975 million remaining under its share repurchase authorization. Willis Towers intends to repurchase $0.5 billion worth shares in 2017.

With respect to estimate revisions, The Zacks Consensus Estimate moved up 1.7% to $8.57 for 2017 and 0.8% to $9.80 for 2018 in the last 30 days. Willis Towers projects adjusted earnings per share between $8.40 and $8.55 in 2017. The expected long-term earnings growth rate is currently pegged at 9.8%, which is above the industry average of 9.5%. Also, price earnings growth ratio of 1.67 compares favorably with the industry average 1.78.

Stocks to Consider

Some better-ranked stocks from the finance sector are eHealth Inc. (NASDAQ:EHTH) , MarketAxess Holdings Inc. (NASDAQ:MKTX) , and Visa Inc. (NYSE:V) .

eHealth provides private online health insurance services in the United States and China. The company had an average positive surprise of 125.15% in the last four quarter. The stock flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

MarketAxess is a leading multi-dealer trading platform that offers institutional investors access to global liquidity in products like U.S. The company had an average positive surprise of 7.26% in the last four quarter average surprise. The stock carries Zacks Rank #1.

Visa Inc. operates retail electronic payments network worldwide. The company had an average positive surprise of 7.24% in the last four quarter average surprise. The stock carries Zacks Rank #2 (Buy).

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