Can Commissions And Fees Up Willis Towers (WLTW) Q4 Earnings?
Zacks Investment Research | Feb 05, 2018 11:24PM ET
Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is slated to report fourth-quarter 2017 results on Feb 8 before the market opens. Last quarter, the company missed the Zacks Consensus Estimate by 0.25%.
Let’s see, how things are shaping up for this announcement.
Commissions and fees in the to-be-reported quarter are likely to have improved on organic growth across all segments and a rich contribution from acquisitions. An improving rate environment might have cushioned better investment results.
The above positives have possibly driven the top line in the fourth quarter. The Zacks Consensus Estimate for revenues is pegged at $1.99 billion, up 3.4% year over year.
Exchange business is expected to have remained strong in the to-be-reported quarter. Sales pipeline continues to be solid, especially in the mid-market and also, memberships have increased. The Zacks Consensus Estimate for exchange solutions revenues is pegged at $192 million, up 7.3%, sequentially.
Operational Improvement Program and cost synergies from the company’s merger are likely to have benefited margins. However, costs incurred due to forex hedging program could limit the upside. The company expects approximately $10 million of expense associated with currency hedging programs in the fourth quarter. Nonetheless, the program is estimated to result in $95 million in costs savings aiding margin expansion in the process. Additionally, the company estimates merger-related cost savings guidance of $30 million in 2017.
Management expects integration expense to total $240 million for 2017.
Nonetheless, share buybacks have probably boosted the bottom line.
The Zacks Consensus Estimate for fourth-quarter earnings is pegged at $2.11 per share, reflecting a 12.2% year-over-year rise.
Willis Towers projects adjusted earnings per share between $8.36 and $8.51 in 2017. The company predicts constant currency revenue growth of about 3% in 2017. Adjusted EBITDA margin is forecast in the band of 23-24%.
Willis Towers anticipates low single-digit constant currency commissions and fees growth for Human Capital and Benefits plus Corporate Risk and Broking segments. Commissions and fees at Investment, Risk and Reinsurance segment is estimated to rise between low and mid-single-digit. Whereas commissions and fees at Benefits, Delivery and Administration segment is projected to increase 10%.
What Our Quantitative Model Predicts
Our proven model does not conclusively show that Willis Towers is likely to beat estimates this quarter. This is because a stock needs to have the right combination of the two main ingredients — a positive Zacks Investment Research
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