Willis Group Upgraded to Neutral - Analyst Blog
On Feb 26, 2013, we upgraded
Willis Group Holdings plc
) to Neutral from Underperform due to its solid performance in
the fourth quarter. Moreover, management is reviewing the
organizational design to drive cost savings for this Zacks Rank
#3 (Hold) insurance broker.
Why the Upgrade?
Willis Group posted adjusted net income from continuing operations of 45 cents per share, surpassing the Zacks Consensus Estimate by a penny.
The company generated organic growth in commissions and fees of 7.5% in the fourth quarter, the highest growth rate since the third quarter of 2006, with contribution from all the segments.
Further, Willis Group, to enhance its profitability, is undertaking a cost savings initiative. Management is reviewing the organizational design and expects to reduce headcount. It expects to realize cost savings of $20 million to $25 million in 2013 and annualized cost savings of approximately $25 million to $30 million.
The review will be completed in the first quarter of 2013. As
a result, Willis Group expects to incur a pre-tax charge of about
$35 million to $45 million in the first quarter of 2013.
Moreover, Willis Group has consistently tried to enhance shareholder value via dividend increase as well as share buybacks. It already exhausted its $100 million buyback program in 2012 and recently hiked dividend by 3.7%. The company's dividend yield is 3.05%, ahead of the industry yield of 1.64% and Marsh & McLennan Companies Inc. 's ( MMC ) yield of 2.55%.
The Zacks Consensus Estimate for 2013 is currently pegged at $2.66 per share, up 3% year over year.
Other Stocks to Consider
Among other insurance brokers, Brown & Brown Inc . ( BRO ), and Arthur J Gallagher & Co . ( AJG ) carry a Zacks Rank #2 (Buy), and appear impressive.
GALLAGHER ARTHU (AJG): Free Stock Analysis Report
BROWN & BROWN (BRO): Free Stock Analysis Report
MARSH &MCLENNAN (MMC): Free Stock Analysis Report
WILLIS GP HLDGS (WSH): Free Stock Analysis Report
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