Willis Group's Buyouts Pay Off: Should You Buy the Stock? - Analyst Blog

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We issued an updated research report on Willis Group Holdings Public Limited Company WSH on Apr 1, 2015.

Willis Group's fourth-quarter 2014 adjusted net income of $0.46 per share surpassed the Zacks Consensus Estimate of $0.45 by a penny. The bottom line also improved 17.9% year over year on higher revenues. The increase in revenues, in turn, is attributable to mid-single digit organic growth in commissions and fees as well as recent acquisitions.

Willis Group has been consistently expanding its global presence in countries like Italy, Canada, the U.K. and France. The company has been undertaking a number of acquisitions to drive inorganic growth. In 2014, the company made five acquisitions. These include the takeovers of Charles Monat Limited, Max Matthiessen, IFG Group plc., Miller Insurance Services, and  Almondz Insurance Brokers Private Limited.

Willis Re Inc. - the North American reinsurance business of Willis Group - has also inked a deal to buy SurePoint Reinsurance Advisors, LLC in 2014.

The company expects the acquisitions of Charles Monat, Max Matthiessen and Miller Insurance Services (likely to be closed in 2015), to contribute to the company's EBITDA in 2015. Willis Group also believes that the transactions will be accretive to its earnings in 2015, 2016 and 2017.

Furthermore, Willis Group has been striving to enhance its shareholder value via dividend increases and share buybacks. In Feb 2015, the company's board of directors authorized a 3.3% dividend hike, increasing dividend at a seven-year compound annual growth rate (CAGR) of 2.54%. Additionally, the company spent $213 million to buy back 5.1 million shares in 2014 and intends to utilize another $175 million for the same in 2015.

In order to improve the clients services offered, realize operational opportunities as well as make new investment in growth initiatives, Willis Group announced the Operational Improvement Program in Apr 2014. Cost savings worth $11 million were already achieved in 2014. Going forward, this program is expected to lead to more cost savings and also to expand margins.

However, Wills Group has been experiencing a decline in investment income since 2011 due to lower-than-average interest rates. Operating expenses have also been on a rise over the last few years resulting in margin contraction. Moreover, the implementation of the Operational Improvement Program from second quarter of 2014, led to higher restructuring costs, which in turn increased the overall expenses of the company. In 2014, the company incurred expenditures of $36 million for this program.

Currently, Wills Group carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked stocks from the insurance sector include Arch Capital Group Ltd. ACGL , First American Financial Corp. FAF and Fidelity National Financial, Inc. FNF . All these stocks sport a Zacks Rank #1 (Strong Buy).

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WILLIS GP HLDGS (WSH): Free Stock Analysis Report

FIRST AMER FINL (FAF): Free Stock Analysis Report

FNF GROUP (FNF): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Stocks
Referenced Symbols: FAF , FNF , ACGL

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