Willis Group Reports Bleak 3Q - Analyst Blog
24 10월 2012 - 9:49PM
Zacks
Willis Group Holdings plc (WSH) reported
third-quarter 2012 adjusted net income from continuing operations
of 22 cents per share, falling short of the Zacks Consensus
Estimate by 8 cents.
Results were also 46% lower than 41 cents earned in the year-ago
quarter. Adjusted net income from continuing operations was $38
million, down 47% year over year. Lower revenue coupled with higher
expenses weighed on the performance.
Including an $11 million charge related to a settlement with a
former joint venture partner in India and a $1 million loss on
disposal of the Indian operations, the company reported net income
of $26 million or 15 cents per share, comparing unfavorably with
$60 million or 34 cents earned in the year-ago quarter.
Operational Performance
Total revenue in the quarter decreased 0.8% year over year to $754
million due to lower commissions and fees and lower investment
income. Also, revenues lagged the Zacks Consensus Estimate of $770
million.
Commissions and fees went down 1% year over year to $749 million in
the quarter, as foreign currency translation had a negative impact
on it.
Investment income also declined 43% from the year-ago quarter to $4
million, attributable to lower net yields on cash and cash
equivalents.
Total expense increased 2.1% year over year to $684 million,
primarily due to an increase in salaries and benefits and higher
depreciation expense.
In the quarter under review, adjusted operating income was $82
million, down 22% year over year. Operating margin contracted 290
basis points to 10.9%.
Segment Update
Global: Organic growth in commissions and fees was
3% in the quarter, while reported growth was flat with year-ago
level.
Organic growth was primarily driven by mid double-digit increase in
Global Specialties.
Operating margin was 22.1%, contracting 50 basis points year over
year.
North America: Commissions and fees, on an organic
basis and reported basis remained flat with year-ago level.
Operating margin in the quarter contracted 280 basis points.
International: Commissions and fees increased 5%
year over year on an organic basis, while on a reported basis, it
declined 2%. Asia and Latin America reported mid teen-digit growth,
while the UK business was up in low single-digits. On the flip
side, Australasia and Europe were each down in low-single
digits.
Operating margin was a negative 4.5%, compared with 1.9% in the
year-ago quarter.
Financial Update
The cash and cash equivalent balance at quarter end stood at $424
million, down 2.7% from 2011 end.
Long-term debt edged up 0.4% to $2.4 billion from 2011 end.
Dividends and Share Buybacks
Willis spent $42 million to buy back 1.16 million shares in the
quarter. With this, it exhausted the $100 million in 2012 buyback
authorization.
The company’s board authorized a dividend of 27 cents to the
shareholders of record as on December 31, payable on January 15,
2013.
Zacks Rank
We retain our Neutral recommendation on Willis Group. The
quantitative Zacks #3 Rank (short-term Hold rating) for the company
indicates no clear directional pressure on the stock over the near
term.
Marsh & McLennan Companies Inc. (MMC), which
competes with Willis Group, also shares a Zacks #3 Rank and is
scheduled to release its third quarter results before the opening
bell on November 6.
MARSH &MCLENNAN (MMC): Free Stock Analysis Report
WILLIS GP HLDGS (WSH): Free Stock Analysis Report
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