Willis Towers Watson Poised For Guidance Raise, Wells Fargo Says In Upgrade

Willis Towers Watson PLC WLTW appears poised to generate higher-than-expected organic revenue growth in the second quarter and could raise full-year EPS guidance, according to Wells Fargo.

The Analyst

Elyse Greenspan upgraded Willis Towers Watson from Market Perform to Outperform and raised the price target from $175 to $220.

The Thesis

Willis Towers Watson faces easy comps for organic revenue growth in the second quarter and may record around $24 million in the human capital and benefits segment in the second and third quarters due to accounting changes, Greenspan said in a Wednesday upgrade note. (See her track record here.) 

The $24 million from revenue recognition accounting changes positions the company to beat Wells Fargo's second-quarter organic revenue growth estimate of 4% as well as the full-year outlook, the analyst said. 

The Street estimates for 2019 do not accurately reflect the impact of the company's acquisition of the direct-to-consumer health care organization TRANZACT, she said. 

Wells Fargo expects Willis Towers Watson to raise its 2019 EPS guidance to reflect TRANZACT, a deal that is likely to be accretive to full-year figures “as the business earnings all [come] in Q4.”

Wells Fargo left its 2019 EPS estimate unchanged at $11, and Greenspan said the figure is  already higher than Willis Towers Watson's guidance of $10.60-$10.85.

Wells Fargo raised its 2020 and 2021 EPS estimates from $11.75 to $11.95 and from $12.75 to $13.10, respectively, to reflect stronger revenue growth.

Price Action

Willis Towers Watson stock was up 0.25% at $196.10 at the time of publication Thursday. 

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