Will Willis Towers (WLTW) Q2 Earnings Deliver A Surprise?

We expect Willis Towers Watson plc (NASDAQ:WLTW) to beat expectations when it reports second-quarter results on Aug 5 before market open.

Why a Likely Positive Surprise?

Our proven model shows that Willis Towers has the right combination of the two key ingredients to beat estimates.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.89%. This is because the Most Accurate estimate is pegged at $1.62, while the Zacks Consensus Estimate stands lower at $1.59. A positive ESP is a meaningful indicator of a likely positive earnings surprise for the company.

Zacks Rank: Willis Towers carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Rank of #1, 2 or 3 have a significantly higher chance of beating on earnings.

Conversely, the Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement.

What is Driving the Better-Than-Expected Earnings?

Strategic acquisitions (Miller and Gras Savoye in particular) are expected to boost the top line. Risk and Financial Services revenues are likely to remain soft in the to-be-reported quarter. However, geographic diversification should support overall growth. Fees and commissions will likely improve on strong organic growth across segments.

Free cash flow is also likely to improve in the second quarter.

Then again, we cannot ignore an expected rise in interest expense due to the issuance of debt. Operating expenses too are likely to increase. Moreover, Willis Towers may witness a decline in investment income owing to lower average interest rates.

Also, the company incurred restructuring costs due to its Operational Improvement Program. However, the company likely may have saved costs owing to the program.

With respect to the surprise trend, the company delivered positive surprises in two of the last four quarters, with a negative beat of 3.28%.

Other Stocks to Consider

Here are some other companies from the finance sector that you may want to consider as these also have the right combination of elements to post an earnings beat this quarter:

Manulife Financial Corporation (NYSE:MFC) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is set to report second-quarter earnings results on Aug 4.

Sun Life Financial Inc. (TO:SLF) has an Earnings ESP of +1.47% and a Zacks Rank #2 (Buy). The company is slated to report second-quarter earnings results on Aug 10.

AerCap Holdings N.V. (NYSE:AER) has an Earnings ESP of +1.4% and a Zacks Rank #2. The company is set to report second-quarter earnings results on Aug 9.

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