Willis Towers Watson To See Short-Term Success Amid Defined Benefit Plan Shifts - Analyst Upgrades Stock

Zinger Key Points
  • BMO upgrades Willis Towers Watson, sees upside potential in near-term growth.
  • The company's broking segment outperforms peers with 1.5x higher organic growth estimate.

BMO Capital Markets analyst Michael Zaremski upgraded Willis Towers Watson PLC WTW to Market Perform from Underperform and maintained the target price at $298.

Last week, the company reported Q4 adjusted EPS of $7.44, beating the consensus of $7.05, and sales of $2.91 billion, slightly missing the street view of $2.92 billion.

The analyst estimates Willis Towers’ recent two-quarters of organic growth margin upside surprise within its Risk & Broking segment to continue beating the consensus through the first half of FY24.

Zaremski estimates that it implies that near-term broking segment organic growth, which averaged ~10%, will likely remain 1.5x that of peers.

The analyst says Willis is meaningfully overweight vs. peers in its market-leading defined benefit (DB) plan administration business.

In the long term, Zaremski says that the company’s business will likely exhibit a low-to-no growth profile.

Willis faces a shrinking market for its defined benefit plans due to higher interest rates but sees a rise in “buy-out/in” activity as companies take advantage of increased pension funding rates and de-risk their plans, writes the analyst.

Zaremski estimates adjusted EPS of $16.87 in FY24 and $20.39 (prior $19.73) in FY25.

Price Action: WTW shares are trading lower by 0.01% at $271.84 on the last check Monday.

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