Willis Towers Watson Management Remains Upbeat On Meeting Sales Growth Targets

Willis Towers Watson PLC WLTW held its first analyst day as a combined entity on Thursday. The company maintained an upbeat tone regarding its margin potential and free cash flow generation in 2018.

Barclays’ Jay Gelb maintained an Overweight rating on the company, with a $148 price target.

2018 Guidance

The company raised its 2018 EPS guidance from $10 to $10.10-$11.50, with upside potential of $12, and reaffirmed its adjusted EBITDA margin guidance of 25 percent.

“Notably, management anticipates about a third of the $325mn of savings from legacy Willis' operational improvement program could fall to the bottom line, but there has been no benefit so far,” Gelb mentioned.

Willis Towers Watson reiterated its FY 2016 organic revenue growth guidance of 2-3 percent, which the analyst believes is achievable, while pointing out that weak commercial P&C pricing and slow economic recovery in Asia and Europe were headwinds.

Free Cash Flow

According to the Barclays report, “The company expects to generate strong $1.3-$1.4bn of free cash flows by the end of 2018, of which around $1bn could be used for share buybacks. Free cash flow in 2016 is expected to be ~$650mn, including restructuring and integration costs, and the recently announced $120mn Stanford litigation settlement.”

The analyst views Willis Towers Watson as a “strategically favorable combination."

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