Watson Wyatt Worldwide, Inc. (WW) is a global consulting firm with 7,000 employees in 32 countries. The company is benefiting from the strong global economy, having surprised on estimates each of the last four quarters by an average of 15.25%.
WW, a Zacks #2 Rank (Buy), offers services on managing the cost and effectiveness of employee benefit programs; developing attraction, retention and reward strategies; and advising pension plan sponsors and other institutions on optimal investment strategies.
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On June 6, the company completed its acquisition of a 20% stake in South African actuarial and employee benefits consultancy, Fifth Quadrant. Fifth Quadrant employs 72 people in offices in Johannesburg and Cape Town. The firm advises 36 of the largest 100 South African funds by asset size.
"Fifth Quadrant is an excellent strategic fit and shares our focus on high-quality client service," said Babloo Ramamurthy, regional manager for Watson Wyatt. "We see tremendous growth opportunities in the coming years, in South Africa and across the whole continent."
Watson Wyatt Grew Revenues by 6% in the Third Quarter
On May 8, Watson Wyatt announced third quarter earnings and beat Wall Street estimates by 15.66%, or 13 cents per share. Net income rose 26% to $42.5 million, or 96 cents per share, from $33.8 million, or 76 cents per share, in the third-quarter 2007.
Revenues increased 16% to $457.5 million compared to $395.6 million in the year-ago period. Excluding acquisitions and changes in foreign exchange rates, revenues rose 6% from the third-quarter 2007. All five operating segments saw increases in revenue compared to the year-ago period.
Watson Wyatt Forecasts the Full Year 2008
The company provided guidance for the fourth quarter and the full year. WW expects earnings per share in the fourth quarter to be in the range of 74 cents to 77 cents. For the full year, the guidance range is for $3.29 to $3.32 per share. The guidance assumes an average exchange rate of $1.95 to the British pound for the fourth quarter.
Consensus Estimates Rising for the Fourth Quarter and the Full Year
Consensus estimates are up in the last 30 days for both the fourth quarter and 2008. For the fourth quarter, estimates are up two cents to 80 cents from 78 cents per share, higher than the company's guidance range.
For the full year, estimates are up five cents to $3.35 from $3.30 per share, which is also higher than the company's forecast.
Analysts expect year-over-year earnings growth in 2008 of 28.78%.
Watson Wyatt has a forward P/E of 14.90. The company has a current dividend yield of 0.50%. Its trailing return on equity (ROE) is 17.10%.
