Towers Watson Profit Tops Expectations

Towers Watson Co., which in late June agreed to merge with Willis Group Holdings, reported better-than-expected revenue and profit for its June quarter, helped by a recent mergers-and-acquisitions frenzy.

But for the current quarter, the company offered guidance that fell below Wall Street expectations. For the fiscal first quarter ending in September, Towers Watson forecast per-share earnings of $1.30 to $1.35 and revenue of $870 million to $885 million. Analysts polled by Thomson Reuters had recently projected earnings of $1.38 a share and revenue of $891.6 million.

Towers Watson expects foreign exchange to bring down profit by four cents a share and revenue by $40 million.

The combination of Arlington, Va.-based Towers Watson and European insurance broker Willis Group will form an $18 billion global firm with offerings from insurance and reinsurance to retirement planning and health-care consulting.

The combination would further diversify Willis beyond insurance and reinsurance and give Towers Watson access to a global distribution network. The combined company can cross-sell clients, including many Fortune 1000 companies, on a wider swath of services and products, from retirement consulting to risk management. The deal is expected to close by the end of the year.

In all for the period ended June 30, profit grew to $89.1 million, or $1.28 a share, from $82.4 million, or $1.17 a share, a year earlier. Excluding special items, per-share earnings were $1.51.

Revenue edged up 1% to $888.2 million, or 7% excluding currency impacts.

Analysts polled by Thomson Reuters had forecast $1.41 a share in earnings on $864.9 million in revenue.

Revenue in its exchange services business jumped 31% to $97.9 million, boosted by membership growth. Talent and rewards revenue grew 11% to $145.4 million, amid strong mergers and acquisitions activity in the Americas.

Risk and financial services revenue fell 10% to $145.1 million amid decreased consulting demand abroad, while revenue in its benefits segment fell 2% to $472.7 million.

Write to Chelsey Dulaney at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires