BMO Capital Markets upgraded Willis Towers Watson (WTW) to Market Perform from Underperform on the prospect of continuing organic growth and margin upside within its Risk & Broking segment.
Analyst Michael Zeremski expects that to help the company continue beating consensus through the next two quarters. Also on Monday, Citi upgraded WTW to Buy.
The analyst estimates that Willis (WTW) has made meaningful talent acquisitions in recent years, which likely includes book-of-business “book sale” acquisitions. That implies that near-term broking segment organic growth, which has averaged ~10%, is likely to remain 1.5x that of peers, he said.
In addition, businesses’ near-record employee pension funding is poised to provide a growth tailwind in WTW’s slowest long-term growth rate business line. Its market-leading defined benefit plan business administration is expected to exhibit low-to-no growth in the longer term. But Zaremski sees more work for WTW to perform as the plans that the company services experience “buy-out-/in” activity.
“This dynamic is likely having a 100 bps+ organic growth tailwind on WTW’s largest segment,” he wrote.
Zaremski lifted his price target on Willis Towers Watson (WTW) to $298 from $236.