On Friday, CFRA adjusted its view on Willis Towers Watson (NASDAQ:WTW), reducing the firm's price target from $285 to $275 while maintaining a Hold rating. The adjustment reflects a valuation of WTW shares at 15.4 times the adjusted earnings per share (EPS) estimate for 2025, which has been increased by $0.40 to $17.90. The 2024 EPS estimate also received a slight boost of $0.15, bringing it to $16.20.
Willis Towers Watson's first-quarter earnings for 2024 were reported at $3.29 per share, surpassing both CFRA's estimate of $3.12 and the consensus estimate of $3.25, before accounting for restructuring and other charges. These charges totaled $1.38 per share, compared to $0.58 in the same quarter the previous year. Despite this earnings beat, the company's revenue growth of 4% fell short of CFRA's projected range of 5% to 8% and also lagged behind many of its peers.
In response to the lower-than-expected revenue growth, CFRA has revised its 2024 revenue growth forecast for Willis Towers Watson to an increase of 4% to 7%, with an anticipated growth of 4% to 8% in 2025. The current share price trades at a multiple of 15.7 times CFRA's 2024 EPS estimate, which represents a discount of over 25% compared to the average of its peer group.
The analysis notes that Willis Towers Watson has faced competitive challenges following the failed merger with Aon (NYSE:AON). While CFRA acknowledges the company's restructuring efforts, the firm believes that the slower rate of top-line growth compared to peers hinders the stock's potential to narrow its valuation gap.
InvestingPro Insights
Willis Towers Watson (NASDAQ:WTW) is currently navigating the market with a solid foundation in profitability and a commendable track record of dividend consistency. According to InvestingPro data, the company boasts a market capitalization of $25.56 billion and maintains an attractive P/E ratio of 17.68 based on the last twelve months as of Q1 2024. This valuation is complemented by a revenue growth of 7.04% during the same period, indicating a robust financial performance.
InvestingPro Tips highlight that WTW has not only raised its dividend for 7 consecutive years but has also maintained dividend payments for 22 consecutive years, showcasing its commitment to shareholder returns. Additionally, analysts predict the company will be profitable this year, which is corroborated by WTW's profitability over the last twelve months. Despite concerns over its high P/E ratio relative to near-term earnings growth, the company's consistent dividend growth of 7.32% as of Q1 2024 remains a point of investor interest.
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