NEW YORK (TheStreet) -- Towers Watson (TW) - Get Report shares are down 1.82% to $135.70 in pre-market trading after the company merged with insurer Willis Group Holdings (WSH) in an $18 billion all-stock deal.
The combined company will be called Willis Towers Watson and have combined annual revenue of $8.9 billion and 39,000 employees, according to the Associated Press.
Willis shareholders will hold a slight majority of shares, 50.1%, while Towers Watson shareholders will own the remaining 49.9%.
The company's headquarters will be in Ireland where Willis Group is located. Towers Watson is based in Arlington, VA, and the companies estimate that the deal will save them between $100 million and $125 million three years after the closing of the deal.
Willis Group shares are up 7.6% to $48.85 in pre-market trading today.
TheStreet Ratings team rates TOWERS WATSON & CO as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:
"We rate TOWERS WATSON & CO (TW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance, growth in earnings per share and increase in net income. We feel its strengths outweigh the fact that the company shows low profit margins."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- TW's revenue growth has slightly outpaced the industry average of 1.1%. Since the same quarter one year prior, revenues slightly increased by 1.8%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- TW's debt-to-equity ratio is very low at 0.07 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, TW has a quick ratio of 1.63, which demonstrates the ability of the company to cover short-term liquidity needs.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 34.07% over the past year, a rise that has exceeded that of the S&P 500 Index. Regarding the stock's future course, although almost any stock can fall in a broad market decline, TW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
- TOWERS WATSON & CO has improved earnings per share by 7.2% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, TOWERS WATSON & CO increased its bottom line by earning $4.98 versus $4.12 in the prior year. This year, the market expects an improvement in earnings ($6.09 versus $4.98).
- The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and the Professional Services industry average. The net income increased by 1.6% when compared to the same quarter one year prior, going from $102.51 million to $104.14 million.
- You can view the full analysis from the report here: TW Ratings Report