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BMO Capital Markets has maintained its Market Perform rating on Willis Towers Watson (NASDAQ: NASDAQ:WTW) with a steady price target of $298.00.
The stance comes as the firm adjusts its forward earnings per share (EPS) estimates for the insurance broker, taking into account the upcoming sale of TRANZACT.
The analyst from BMO Capital Markets noted that the sale of TRANZACT by Willis Towers Watson is expected to be finalized in the fourth quarter of 2024.
However, the financial impact of this divestiture will be reflected in the company's financials starting in the third quarter of 2024. This accounting treatment is in line with the company's previous handling of similar transactions.
Specifically, the revenue alterations linked to TRANZACT's divestiture will be incorporated into the acquisitions and divestitures section of Willis Towers Watson's financial model during the third quarter of 2024.
The approach follows the precedent set by Willis Towers Watson during its sale of Willis Re. At that time, Willis Towers Watson had employed a "held for sale" accounting method and had excluded Willis Re from its financial results while the sale to AJG was pending in the third quarter of 2021.
The update to the EPS estimates by BMO Capital reflects a meticulous consideration of Willis Towers Watson's financial reporting methods and the expected timeline of the TRANZACT sale. The Market Perform rating indicates that BMO Capital views the stock as likely to perform in line with the broader market.
In other recent news, global advisory firm Willis Towers Watson has been the subject of several significant developments. The company has received an Overweight rating from Wells Fargo, which has increased its price target from $321.00 to $334.00 in anticipation of potential growth catalysts. These include Willis Towers Watson's third-quarter earnings report and an upcoming investor day in December.
The company has also made strategic moves to reshape its business landscape, including the acquisition of a stake in UK-based wealth management firm atomos and the formation of a co-brokerage partnership with The J. Morey Company. These developments are expected to strengthen Willis Towers Watson's position in the UK's wealth market and provide customized risk management solutions to North American companies with headquarters in Japan.
On the other hand, Willis Towers Watson plans to sell its TRANZACT operation to private equity firms GTCR and Recognize for $632 million. This sale is projected to result in a significant charge in the third quarter, estimated between $1.6 billion and $2.1 billion.
In light of these changes, several analyst firms have updated their outlook on Willis Towers Watson. Truist Securities and Roth/MKM have both increased their price targets and maintained their Buy ratings, while Barclays initiated coverage on Willis Towers Watson with an Underweight rating due to concerns about the company's ability to meet its organic growth estimates.
InvestingPro Insights
To complement BMO Capital Markets' analysis of Willis Towers Watson (NASDAQ:WTW), recent data from InvestingPro provides additional context for investors. WTW's market capitalization stands at $29.72 billion, reflecting its significant presence in the insurance brokerage sector. The company's revenue for the last twelve months as of Q2 2024 reached $9.69 billion, with a solid revenue growth of 6.7% over the same period.
InvestingPro Tips highlight WTW's strong dividend history, having maintained dividend payments for 22 consecutive years and raised them for 7 consecutive years. This consistent dividend performance aligns with the company's stable financial position, even as it navigates strategic changes like the TRANZACT sale.
The company's profitability is underscored by its adjusted operating income of $2.06 billion and an operating income margin of 21.28% for the last twelve months as of Q2 2024. These figures suggest that WTW maintains robust operational efficiency, which could help offset any short-term impacts from the TRANZACT divestiture.
It's worth noting that WTW is trading near its 52-week high, with a price that is 96.45% of its 52-week peak. This performance, coupled with a year-to-date price total return of 22.49%, indicates strong investor confidence in the company's strategic direction and financial management.
For readers interested in a deeper dive into WTW's financials and future prospects, InvestingPro offers 6 additional tips and a comprehensive suite of financial metrics to further inform investment decisions.
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