Why Willis Towers Watson (WTW) is a Defensive Value Play in 2025 and Beyond

In an era of geopolitical volatility, regulatory upheaval, and economic uncertainty, investors are gravitating toward companies that thrive in turbulent environments. Willis Towers Watson (NASDAQ: WTW) stands out as a prime example of a defensive industry leader with margin expansion tailwinds and strategically undervalued share buybacks. Here's why WTW is a compelling long-term investment.

1. Defensive Industry Position: Navigating Regulatory and Cyber Risks

WTW operates at the intersection of insurance, risk management, and regulatory compliance—sectors that are inherently recession-resistant. According to WTW's 2024/25 Global D&O Survey, cyber risks (data loss and cyber extortion) remain the top concern for corporate directors, a trend that has intensified amid the Trump administration's deregulatory push. While this creates uncertainty, it also fuels demand for WTW's advisory services, which help clients navigate compliance with fragmented regulations like AI bills in 45 states or California's climate disclosure laws.

Despite these tailwinds, WTW's stock trades near $310—a 10% discount to its 52-week high—even as its Q1 2025 EPS rose 27% to $2.33. This disconnect highlights an opportunity to buy a defensive growth stock at a bargain price.

2. Margin Expansion: A Catalyst for Shareholder Value

WTW's operating margin surged 740 basis points to 19.4% in Q1 2025, driven by:
- Cost savings from its $500M Transformation program (e.g., cloud migration and process automation).
- Strong organic revenue growth (+5% in Q1) in both its Health, Wealth & Career (HWC) and Risk & Broking (R&B) segments.

The R&B segment alone saw margins expand 120 basis points to 22%, fueled by high-margin consulting services in cyber risk and regulatory compliance. Management has set an ambitious target: 100 basis points of annual margin growth in R&B over the next three years.

With a 2025 adjusted operating margin of 21.6%—up 100 basis points from 2024—WTW is proving it can grow margins even amid macroeconomic headwinds. This margin resilience positions it to outperform peers in a slowdown.

3. Undervalued Share Buybacks: A $1.5B Catalyst at Work

In Q1 2025, WTW repurchased $200M in shares, accelerating its $1.5B annual buyback program. Here's why this is undervalued:
- Stock price dynamics: Shares trade near $310—a 20% discount to their pre-pandemic peak—despite stronger earnings and margin growth.
- Accretive buybacks: With diluted EPS up 27%, repurchases at current prices accelerate EPS growth, creating a virtuous cycle for investors.

The company's $1.5B commitment for 2025 represents ~5% of its market cap, a bold move signaling confidence in its valuation. Even with Q1 free cash flow challenges (-$86M), WTW's long-term financial discipline ensures these buybacks will remain a priority.

Why Act Now?

• Defensive moat: WTW's services are non-discretionary in a world of rising litigation and cyber threats.
• Margin upside: The R&B segment's 100bps/year margin target is achievable, with HWC margins already at 26.7%.
• Undervalued buybacks: At $310, shares are cheap relative to their $3.13 adjusted EPS, implying a 9.9x P/E—well below its five-year average of 15x.

Conclusion: A Rare Opportunity in a Defensive Gem

WTW is a best-in-class play on two unstoppable trends: risk management demand and margin-driven growth. With shares trading at a discount to their fundamentals and a $1.5B buyback turbocharging returns, this is a stock to buy and hold for years.

Investors who act now gain exposure to a company poised to capitalize on regulatory chaos, cyber threats, and the global need for resilient risk strategies. The only question is: Why wait?

Current Price (May 23, 2025): $306.78
Target Multiple: 12x 2025E EPS ($3.13) = $37.56/share
Upside: ~22% from current levels.

Risks: Economic recession, delays in margin improvements, regulatory overreach.
Reward: A 22% upside with a low-risk profile, anchored in WTW's defensive industry dominance.

This is a call to act—before the market catches on.