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Can Aon Plc (AON) Beat Earnings Estimates?

Zacks Equity Research

Aon Plc (AON) is set to report first-quarter 2014 results on April 25, 2014. Last quarter, it posted a 0.65% surprise. Let’s see how things are shaping up for this announcement.

Factors this Past Quarter

On the operational front, Aon has undertaken restructuring plans that have generated savings and checked operating expenses, making way for margin expansion. However, increased debts, competitive threats and exposure to foreign exchange rate fluctuations might dampen the results to some extent.

Aon has been upfront in bolstering its capital deployments that should help the company retain investor confidence. In order to share more profits with shareholders, the company increased its annual dividend by a significant 43% recently. With a strong cash flow, the company is favorably positioned to support these initiatives.

Earnings Whispers?

Our proven model does not conclusively show that Aon is likely to beat earnings this quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here as you will see below.

Negative Zacks ESP:  That is because the Most Accurate estimate stands at $1.16 per share while the Zacks Consensus Estimate is pegged at $1.17 per share, translating into a difference of –0.86%.

Zacks Rank #3 (Hold): Aon’s Zacks Rank #3 increases the predictive power of ESP but when combined with a negative ESP, it makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing zero or negative estimate revisions momentum.

Other Stocks to Consider

Here are some other companies you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:  

RenaissanceRe Holdings Ltd. (RNR) with Earnings ESP of +9.52% and Zacks Rank #1 (Strong Buy).

Endurance Specialty Holdings Ltd. (ENH), with Earnings ESP of +9.91% and Zacks Rank #1.

Validus Holdings, Ltd. (VR), with Earnings ESP of +1.30% and Zacks Rank #3.

Read the Full Research Report on AON
Read the Full Research Report on RNR
Read the Full Research Report on ENH
Read the Full Research Report on VR

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