UPDATE: Citigroup Reiterates Buy Rating, Raises PT on Towers Watson & Co. as Company Doubles Down on Healthcare Exchanges with Liazon Acquisition

In a report published Wednesday, Citigroup analyst Ashwin Shirvaikar reiterated a Buy rating on Towers Watson & Co. TW, and raised the price target from $119.00 to $126.00. In the report, Citigroup noted, “We are changing our estimates for TW's acquisition of Liazon, a provider of private benefit exchanges for active employees. The move marks TW's second deal in the healthcare exchange space following the June 2012 acquisition of Extend Health. While Extend gave TW a strong presence in the retiree health market, Liazon is aimed at the larger and less penetrated active market, particularly for small and mid-sized clients. Strategically, this is the right move, as TW strengthens its pre-65 offering (now covers fully- and self-insured as well has a full range of benefits). This can help further accelerate TW's growth profile. While investors may initially balk at the rich valuation, similar to the reaction to Extend Health, we believe it is the right strategic step so TW can properly target the full gamut of healthcare exchange interest. Exchange Solutions can approach 10% of the total revenues by the end of FY15 if execution is good. Maintain Buy on TW.” Towers Watson & Co. closed on Tuesday at $110.51.