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Jefferies said the September 29 investor day will be a positive catalyst for Willis Towers Watson PLC (NASDAQ: WLTW) shares, while it reiterated its Buy rating and $140 price target.
At the event, the company is expected to provide details on its strategy to drive organic growth, which has been a concern for investors. Willis Tower is also expected to provide more color on other EPS levers, including cost saving initiatives and buyback.
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Jefferies, which isn't seeing growth to accelerate in the second half of 2016, expects the management to either directly provide an EPS bridge showing low/high case or give enough key components for investors to build their own.
"Our bridge shows a 2018 EPS range of ~$10.10-12.20. That implies sizable upside to consensus' $9.96, and captures CEO Haley's key bonus payout EPS thresholds of $10.10 and $11.50," analyst David Styblo wrote in a note.
Meanwhile, contrary to Street views, Styblo said the company could achieve its 2018 EBITDA margin target of 25 percent versus 22.5 percent in 2016.
"Our bridge shows the company can still get to 25% even if we assume 40% net savings on the legacy Willis OIP (vs current guidance of 50%) and midpoint of Willis/Towers cost synergies (they will likely hit the high end, in our view)," Styblo highlighted.
In addition, the analyst expects an update on the cost savings front. Despite Willis Tower has reiterated the 2018 gross savings of $325 million, the company hasn't affirmed its net savings goal of 50 percent.
"We wouldn't be surprised if the company lowered expectations, especially as it may need to use more of the gross savings to spur organic growth, which has obviously been below expectations. We assume a net savings range of 30%/50% for the low/high case," Styblo added.
Crypto Whales Are Loading Up — Are You?
New research shows the biggest crypto buyers are back. And this time? They could hold for the possibility that Bitcoin will surpass $100,000 in 2024. You don’t want to miss the next massive crypto bull run like we saw in 2020 and 2021. To know exactly what’s going on and what to buy… Get Access To Benzinga’s Best Crypto Research and Investments For Only $1.