Watson Wyatt Worldwide, Inc. (WW) expects to merge with Towers Perrin in fiscal 2010 which will increase its global reach. The company recently surprised on fourth quarter results continuing its tremendous history of 14 beats in a row.

Company Description

Watson Wyatt Worldwide offers consulting services in 34 countries. It manages the cost effectiveness of employee benefit programs, develops employee retention and reward strategies, provides financial advice to insurance and financial services companies and assists with outsourcing and data services.

Watson Wyatt Surprised for the 4th Consecutive Quarter

On Aug 13, Watson Wyatt reported its fiscal fourth quarter 2009 and surprised on the Zacks Consensus Estimate by 15.94%. Earnings per share were 80 cents compared to the Zacks Consensus Estimate of 69 cents.

Revenues fell 13% to $396.5 million from $453.8 million in the fourth quarter of 2008. For the entire fiscal year 2009, revenues declined 5% to $1.68 billion from $1.76 billion. Exchange rates and severance expenses had a negative impact compared to the year ago period.

The largest business segment, the Benefits Group, which represented 59% of fourth quarter revenues, saw revenues slide 8% to $234 million from $255 million.

The company also still expects to merge with Towers Perrin in fiscal 2010.

Fiscal 2010 Outlook

The company issued first quarter revenue guidance in the range of $385 million to $400 million and earnings per share are expected to be 68 cents to 73 cents. This does not include any impact from the merger with Towers Perrin which will close sometime in fiscal 2010.

Watson Wyatt sees only a slight increase in its full year forecast from fiscal 2009, and also doesn’t include the Towers Perrin merger. Earnings per share are expected in the range of $3.50 to $3.60, which was higher than the Zacks Consensus Estimate.

The full year Zacks Consensus Estimate jumped to $3.41 from $3.22 in the last month.

Value Fundamentals

Watson Wyatt is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of 2.23. The company also has a stellar 5-year average return on equity (ROE) of 17.86%.

Additionally, Watson Wyatt pays a dividend, with a current yield of 0.70%.

Zacks Investment Research