Been watching Willis Towers Watson stock and it's down about 10% since their last earnings drop. Interesting because the earnings actually looked pretty solid on paper, so something else is weighing on sentiment.

Let me break down what happened with their Q4 numbers. They posted adjusted earnings of $8.12 per share, which beat expectations by 2.5%. Bottom line was up 2% year over year, which is decent. Revenues came in at $2.9 billion, down 3% reported but up 6% on an organic basis. They also beat revenue estimates by 2.5%.

What caught my attention was the margin expansion. Their operating income margin hit 36.9%, up 80 basis points. EBITDA margins expanded 30 basis points to 38.2%. These are the kinds of operational improvements you want to see. Their Health, Wealth & Career segment saw margins jump 240 basis points to 44.3%, mainly from a business sale. Risk & Broking margins expanded 120 basis points to 34.7% from strong organic growth.

On the cash side, Willis ended with $3.1 billion in cash, up nearly 66% from year-end. Free cash flow for the full year was $1.55 billion, up 22%. That's solid. But debt did increase 8.4% to $5.7 billion.

Here's the thing though - they're acquiring Newfront, which will be 10 cents dilutive to earnings in 2026. That's probably spooking some investors. Management is guiding for continued margin expansion and projecting a 30-cent FX tailwind next year, but the market seems to be focusing more on the near-term dilution.

Estimates have been trending downward since the report came out. Willis has a Zacks Rank of 3, which basically means hold territory. So yeah, the stock underperforming the S&P 500 makes sense if investors are nervous about execution on the Newfront deal and the dilution impact. Probably worth monitoring how the next quarter shapes up.