The London Company International Equity 3Q 2026 Top 3 Contributors And Detractors

SAP's second-quarter current cloud backlog growth accelerated to 26%. WTW reported second-quarter organic revenue growth of 5%, a 100-basis-point expansion in adjusted operating margin, and 17% growth in adjusted EPS. Weakness in a few holdings weighed on results, but the source characterizes those dislocations as temporary.

Analysis

The useful signal is divergence between reported operating indicators and share-price weakness, not proof that the weakness is temporary. If selling reflects positioning or near-term sentiment rather than deteriorating estimates, SAP and WTW could recover as investors refocus on forward indicators; without price, valuation, or consensus data, that is a watch thesis rather than a confirmed dislocation.

Over 1–3 months, test SAP’s cloud backlog growth for conversion into cloud revenue and whether that conversion supports margins. Backlog growth alone does not establish revenue quality or profitability; Oracle, Microsoft, Salesforce, and Workday remain competitive reference points for enterprise software budgets. For WTW, the combination of organic growth and margin expansion is constructive, but confirm it persists across business lines and is not driven by temporary costs or mix. Aon, Marsh McLennan, and Gallagher are useful peer checks, not automatic shorts or longs.

Over 6–18 months, durable cloud conversion would support SAP’s recurring-revenue mix, while sustained WTW organic growth and operating leverage would support earnings quality. The contrarian risk is treating upbeat company-level metrics as sufficient evidence that stock weakness is mispricing: valuation, expectations, and the cause of the selloff are absent here. Reassess if SAP backlog growth decelerates or fails to convert, or if WTW organic growth/margin expansion reverses.

Key Decisions for Investors

• No immediate directional trade on this evidence alone: first establish whether the weakness reflects estimate cuts, valuation compression, or technical/flow pressure, and compare current multiples with history and peers.
• Put SAP on a 1–3 month catalyst watch; consider adding only if subsequent results show backlog converting into cloud revenue without material margin deterioration. Falsifier: sustained backlog deceleration or weaker cloud conversion.
• Put WTW on an earnings-quality watch; verify organic growth and margin gains across segments before treating the EPS increase as durable. Falsifier: renewed margin contraction or slowing organic revenue.
• Monitor relative performance and estimate revisions versus Oracle/Microsoft/Salesforce/Workday for SAP and Aon/Marsh McLennan/Gallagher for WTW; avoid a peer pair until valuation and operating trends establish a clear relative-value gap.