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Willis Towers (WLTW) Q1 Earnings Beat Estimates, Down Y/Y

Willis Towers Watson plcWLTW reported first-quarter 2016 adjusted net income of $3.41 per share, beating the Zacks Consensus Estimate of $2.80. Earnings declined 2.3% year over year due to higher expenses.

Including one-time adjustments, net income came in at $1.75, down 425 year over year.

Operational Updates

Adjusted revenues improved 13% (16% constant currency growth, 1% organic growth), year over year to $2.3 billion.

Total costs of providing services shot up 140% to $1.9 billion.

Adjusted operating income increased 91% year over year to $646 million. Operating margin contracted 260 basis points to 28.5%

Adjusted EBITDA was $671 million, or 29.6% of adjusted revenues, higher than $579 million, or 28.8% of revenues in the year-ago quarter.

On a year-over-year basis, commissions, fees and consulting revenues shot up 105% to $2.2 billion while interest and other income more than doubled to $15 million.

Quarterly Segment Update

Willis GB : Revenues of $139 million declined 2% (flat constant currency and 2% organic decrease). Operating margin was 14%.

Willis Capital, Wholesale and Reinsurance : Commissions and fees of $331 million improved 12% (14% constant currency growth but 3% organic decrease). Operating margin was 46% in the quarter.

Willis North America : Commissions and fees of $368 million improved 3% (3% constant currency growth and 4% organic growth). Operating margin was 23%.

Willis International : Commission and fees of $481 million improved 68% (84% constant currency growth and 5% organic decrease). Operating margin was 30%.

Towers Watson Benefits : Revenues of $486 million declined 2% (1% constant currency growth). Operating margin was 30%.

Towers Watson Exchange Solutions : Revenues of $152 million improved 57% (57% constant currency growth). Operating margin was 36%.

Towers Watson Risk and Financial Services : Revenues of $144 million declined 8% (4% constant currency decline). Operating margin was 23% in the quarter.

Towers Watson Talent and Rewards : Revenues of $124 million decreased 11% (9% constant currency decline). Operating margin was 10%.

Financial Position

Willis Towers exited the quarter with cash and cash equivalents of $954 million, up 79% over the 2015-end level.

Total long-term debt was $2.8 billion on Mar 31, 2016, 21% above the 2015-end level.

Cash from operations was $118 million in the quarter compared with outflows of $64 million in the year-ago quarter.

2016 Guidance

Willis Towers Watson projects adjusted earnings per share between $7.70 and $7.95. Constant currency revenue growth is expected in the low double digits.

Zacks Rank

Willis Towers presently carries a Zacks Rank #4 (Sell).

Performance of Other Insurance Brokers

The bottom line at Marsh & McLennan Companies, Inc. MMC , Brown & Brown Inc. BRO and Aon plc AON beat their respective Zacks Consensus Estimate in the first quarter.

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MARSH &MCLENNAN (MMC): Free Stock Analysis Report

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WILLIS TWRS WAT (WLTW): 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.


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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