Citigroup (NYSE:C) upgraded Towers Watson and Co (NYSE:TW) from “Hold” to “Buy,” and have raised their target price from $52 to $60, citing their handling of the merger with Towers Perrin particularly well.
At the time of the merger of Watson Wyatt with Towers Perrin, the company had been downgraded because of concerns over the cultural divide and whether it could be surmounted, and the short-term dilution of shares in the company.
Citigroup analyst Ashwin Shirvaikar had this to say about the outlook for Towers Watson, “Many of our concerns when Watson Wyatt announced its merger with Towers Perrin have abated – we now have potential upside catalysts instead. Specifically, TW has executed well to minimize the impact of near term dilution and cultural differences between the two legacy companies. We are more comfortable that TW can use its better-than-expected performance to contain the impact of the share overhang. TWs underperformance over the past 10-12 months helps the valuation. We are Buyers of TW here.”
Estimates by Citigroup for Towers Watson are close in line with consensus, as they’re looking for $3.40 earnings a share, while consensus is $3.41 a share. For their fiscal 2011 earnings a share, Citigroup is estimating $3.87 a share while consensus estimates are the same.
