Willis Towers (WLTW) Q3 Earnings Lag Estimates, Revenues Top

Willis Towers Watson Public Limited Company WLTW reported third-quarter 2017 adjusted net income of $1.12 per share that missed the Zacks Consensus Estimate of $1.13 by 0.9%. However, the bottom line improved 7.7% year over year.

Increase in revenues as well as a solid segmental performance were responsible for this upside.

The company remains focused toward building momentum across its portfolio of businesses while work continues on the integration efforts.

Including amortization, restructuring costs as well as integration and transaction expenses, net loss came in at 40 cents per share, wider than the year-ago loss of 23 cents per share.

Operational Updates

Adjusted revenues improved 4.2% (up 4% on a constant-currency basis as well as organic basis) year over year to $1.9 billion. The top line beat the Zacks Consensus Estimate of $1.8 billion.

Commissions and fees were $1.8 billion, up 4% year over year.

Total costs of providing services nudged up 1.9% year over year to $1.8 billion.

Adjusted EBITDA of $322 million increased 17.1% year over year. Adjusted EBITDA margin expanded 190 basis points to 19.8%.

Adjusted operating income improved 18.1% year over year to $287 million in the quarter.

Quarterly Segment Update

Human Capital & Benefits: Commissions and fees of $736 million were up 2.2% year over year (2% higher on constant-currency basis and 3% higher on organic basis). Total revenues of $736 million were up about 2.2%. Operating margin was 19%.

Corporate Risk & Broking: Commissions and fees of $581 million rose 5.1% (4% higher on constant-currency basis as well as organic basis) year over year. Total revenues of $586 million improved 4.5% year over year. Operating margin was 8% in the quarter.

Investment, Risk & Reinsurance: Commissions and fees of $320 million were up 2.6% (2% higher on constant-currency basis as well as organic basis). Total revenue of $334 million increased 4.7% from the prior-year quarter. Operating margin was 12%.

Benefits Delivery & Administration (formerly known as Exchange Solutions): Commission and fees of $179 million improved 11.2% (11% higher on constant-currency basis as well as organic basis). Total revenue of $179 million climbed 11.2% year over year. Operating margin was 20%.

Financial Update

Cash and cash equivalents increased 4.8% to $912 million from the 2016-end level.

Long-term debt surged 33.8% from the 2016-end level to nearly $4.5 billion at the quarter-end.

Shareholders’ equity slipped 1.4% from the end of 2016 to $9.9 billion as of Sep 30, 2017.

For the first nine months of 2017, cash from operations declined 17.1% to $515 million compared with $621 million in the same period, last year. Free cash flow was $317 million for the first nine months of 2017, down 32.6% compared with $470 million during the same period of 2016.

2017 Guidance Reiterated

Willis Towers has retained its adjusted earnings per share at $8.36 and $8.51 in 2017. Constant-currency revenue growth is estimated to be around 3%.

Zacks Rank

Willis Towers presently 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 firms from the insurance industry that have reported third-quarter earnings so far, the bottom line at The Progressive Corporation PGR, The Travelers Companies, Inc. TRV and RLI Corp. RLI surpassed the respective Zacks Consensus Estimate.

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