Willis Towers Watson Public Limited Company WTW shares have gained 18.1% in the past six months, outperforming the industry’s growth of 9%. The Finance sector and the Zacks S&P 500 index have returned 11.8% and 6.8%, respectively, in the said time frame. With a market capitalization of $30.88 billion, the average volume of shares traded in the last three months was 0.6 million.

WTW Outperforms Industry, Sector, S&P in 6 Months

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WTW has a solid surprise history. The insurance broker surpassed earnings estimates in each of the last four quarters, the average being 7.34%.

Willis Towers’ Growth Projection Encourages

The Zacks Consensus Estimate for Willis Towers’ 2025 earnings per share and revenues indicates a year-over-year increase of 9.1% and 5.5%, respectively, from the corresponding 2024 estimates.

Shares are Affordable

This Zacks Rank #3 (Hold) insurance broker is undervalued compared with its industry. It is currently trading at a price-to-earnings multiple of 16.7, lower than the industry average of 21.

Can the Stock Retain the Momentum?

Willis Towers’ growth strategy encompasses a focus on improving operating margins, increasing free cash flow conversion and driving sustainable revenue growth. Focus on core opportunities with the highest growth and return, which include gaining market share in Risk and Broking and Individual Marketplace, should spur long-term growth and return more value to shareholders.

Well-performing Health, Wealth & Career and Risk & Broking segments, driven by solid customer retention levels, growing new business and geographic diversification, continue to fuel the top line. Most of the company's operating regions experienced revenue growth for 15 straight quarters. 

Strategic acquisitions have expanded its geographical footprint in the last few years in countries like Italy, Canada, the United Kingdom and France, as well as ramped up its product portfolio.

Solid operational performance ensures smooth cash flow. WTW continues to expect a year-over-year improvement in free cash flow margin in 2024.

Distribution of Wealth

Banking on its capital position, WTW distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has witnessed a five-year CAGR (2019-2024) of 6.2%. The insurer expects share repurchases to total approximately $900 million in 2024, subject to market conditions and other relevant factors.

Headwinds

Despite the upside potential, Willis Towers’ expenses have been rising over the last several quarters. Higher salary expenses, incentive costs, improved non-income-related tax expenses and marketing costs, higher restructuring costs, as well as increased consulting and compensation costs related to the Transformation program result in the contraction of margins.

WTW’s trailing 12-month ROE of 18.5% is weak when compared with the industry average of 31%, reflecting its inefficiency in using shareholders' funds.

Stocks to Consider

Investors interested in the insurance industry may look at some better-ranked players like Palomar Holdings, Inc. PLMR, W.R. Berkley Corporation WRB and The Travelers Companies, Inc. TRV, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for W.R. Berkley’s 2025 earnings per share and revenues implies year-over-year growth of 9.6% and 7.9%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 7.10%. In the past six months, shares of WRB have rallied 7.8%.

The Zacks Consensus Estimate for Palomar Holdings’ 2025 earnings per share and revenues implies year-over-year growth of 23.1% and 27%, respectively. It beat earnings estimates in each of the past four quarters, with an average surprise of 14.9%. In the past six months, shares of PLMR have rallied 28.5%.

The Zacks Consensus Estimate for The Travelers’ 2025 earnings per share and revenues implies year-over-year growth of 9.1% and 7.4%, respectively. It beat earnings estimates in three of the past four quarters and missed in one, with an average surprise of 25.4%. In the past six months, shares of TRV have rallied 18.5%.

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