Will Willis Towers (WLTW) Deliver a Beat in Q4 Earnings?

We expect Willis Towers Watson Public Limited CompanyWLTW to surpass expectations in fourth-quarter 2018 results on Feb 7, before the market opens. In the las t report ed quarter, the company delivered a positive surprise of 18.92%.

Why a Likely Positive Surprise?

Our proven model clearly shows that Willis Towers has the right combination of the following two key ingredients to beat estimates this earnings season.

Earnings ESP : Willis Towers has an Earnings ESP of +0.63%. This is because the Most Accurate Estimate is pegged at $4.09 per share, higher than the Zacks Consensus Estimate of $4.06. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Willis Towers Watson Public Limited Company Price and EPS Surprise

Willis Towers Watson Public Limited Company Price and EPS Surprise | Willis Towers Watson Public Limited Company Quote

Zacks Rank : Willis Towers has a Zacks Rank #3 (Hold), which increases the predictive power of ESP as stocks with a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 along with a positive Earnings ESP have significantly higher chances of an earnings beat.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors Driving the Better-Than-Expected Earnings

Willis Towers is likely to report top-line growth in the to-be-reported quarter, primarily driven by a probable increase in new business as well as solid customer retention levels. Also, better-than-anticipated segmental revenues might have aided this upside. The Zacks Consensus Estimate for the metric in fourth-quarter 2018 is pegged at $2.4 billion, reflecting a year-over-year increase of 14.4%.

Notably, Willis Towers projects constant currency revenue growth to be around 4% in 2018.

Further, the insurance broker is likely to have witnessed a rise in commissions and fees in the soon-to-be-reported quarter on the back of anticipated organic growth across its business lines, expanded footprint and contributions from strategic acquisitions.

Consistent share buybacks and a lower tax incidence might have cushioned the company's bottom line in the soon-to-be-reported quarter. In fact, the consensus mark for earnings in the fourth quarter stands at $4.06, representing a significant improvement of 83.7% from the prior-year quarter.

With respect to Exchange business, the company is expected to display a sturdy performance while maintaining a strong sales pipeline in both the middle and large markets. In 2018, the company successfully enrolled 0.2 million lives with 35,000 retirees in the individual marketplace, thus remaining confident about long-term growth of this particular business line.

However, the insurance broker is anticipated to incur higher operating expenses, which can limit the operating margin expansion. Notably, the company projects transaction integration costs of about $180 million in 2018, up from the earlier guided range of $140-$150 million.

Additionally, the company might have experienced a rise in long-term debt that can induce higher interest expenses.

Other Stocks to Consider

Some other stocks worth considering from the finance sector with the perfect mix of elements to also outshine estimates this time around are as follows:

Radian Group Inc. RDN is set to report fourth-quarter earnings on Feb 8. The company has an Earnings ESP of +3.03% and a Zacks Rank of 1. You can see the complete list of today's Zacks #1 Rank stocks here .

Ares Capital Corporation ARCC has an Earnings ESP of +1.10% and a Zacks Rank of 3. The company is slated to announce fourth-quarter earnings on Feb 12.

AerCap Holdings N.V. AER has an Earnings ESP of +6.84% and a Zacks Rank #2. The company is scheduled to release fourth-quarter earnings on Feb 14.

Zacks' Top 10 Stocks for 2019

In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?

Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.

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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.

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

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