Willis Towers (WLTW) Q1 Earnings Surpass, Guidance Intact

Willis Towers Watson Public Limited Company (NASDAQ:WLTW) reported first-quarter 2018 adjusted earnings of $2.71 per share, surpassing the Zacks Consensus Estimate of $2.63 by 3%.

However, the bottom line declined 26.9% year over year.

Willis Towers Watson Public Limited Company Price, Consensus and EPS Surprise

Operational Updates

Willis Towers Watson posted adjusted consolidated revenues of $2.3 million, higher than the Zacks Consensus Estimate of $2.2 billion.

Excluding the Revenue Standard, revenues were $2.6 billion with 10% increase (4% rise on constant currency basis and 6% owing to organic growth).

Total cost of providing services increased nearly 6% year over year to $2 million.

Adjusted EBITDA was $557 million, down 21.3% year over year. Adjusted EBITDA margin was 24.3%.

Adjusted operating income dropped 35.4% year over year to $259 million in the reported quarter.

Quarterly Segment Update

Human Capital & Benefits: Total revenues of $832 million were up 4%. Operating margin was 23%.

Corporate Risk & Broking: Total revenues of $740 million improved 6% year over year. Operating margin was 17% in the quarter under review.

Investment, Risk & Reinsurance: Total revenues of $574 million increased 5% from the prior-year quarter. Operating margin was 45%.

Benefits Delivery & Administration: Total revenues of $122 million climbed 8% year over year. Operating margin was (26%).

Financial Update

Cash and cash equivalents decreased 7.4% to $954 million from the 2017-end level.

Long-term debt nudged up 1.3% from the level at 2017 end to nearly $4.5 billion at the quarter-end.

Shareholders’ equity increased 5.4% from the end of 2017 to $10.7 billion as of Mar 31, 2018.

Cash from operations plummeted to $18 million in the first quarter from $95 million in the year-ago period. Free cash outflow was $47 million.

Business Update

As of Jan 1, 2018, the Company adopted Accounting Standards Codification 606, Revenue From Contracts With Customers (“ASC 606”).

Also, at the outset of the year, the company made certain changes affecting its segmental results. These changes include the realignment of certain businesses within the segments as well as changes to certain allocation methodologies to better reflect the ongoing nature of businesses.

2018 Guidance

Willis Towers projects adjusted earnings per share between $9.88 and $10.12 in 2018. Constant currency revenue growth is estimated at around 3% while 4% increase is anticipated on organic basis.

The company estimates free cash flow between $1.1 billion and $1.3 billion for 2018.

Zacks Rank

Willis Towers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other insurance brokers having reported first-quarter earnings, the bottom line of Marsh & McLennan Companies, Inc. (NYSE:MMC) , Arthur J. Gallagher & Co. (NYSE:AJG) and Brown & Brown, Inc. (NYSE:BRO) beat the respective Zacks Consensus Estimate.

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