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What's in the Offing for Aon (AON) This Earnings Season?

Zacks Equity Research

Aon plc AON is set to report first-quarter 2019 results on Apr 26, before the opening bell. In the last reported quarter, the insurance broker's earnings surpassed the Zacks Consensus Estimate by 1.4% and also rose 8.8% year over year. This upside was primarily supported by the company’s strategic actions and strong segmental performances.

The company flaunts an impressive surprise history, having delivered an earnings beat in all the trailing four quarters, the average being 4.82%.

Factors to Consider Ahead of First-Quarter Release

In the to-be-reported quarter, Aon is likely to perform well on the back of a solid uptick across all its segments, which in turn, are expected to have contributed to its revenue base. Aon’s constant efforts toward strategic investments in portfolio expansion along with productivity improvement measures are anticipated to aid its revenue stream.

The Commercial Risk Solutions segment is expected to perform well on the back of  solid growth across its major geographies. The Dat & Analytics segment is likely to witness an upside across both its business and consumer solutions.The Zacks Consensus Estimate for revenues from the company’s Commercial Risk Solutions and Data & Analytics reflects a year-over-year increase of 8.9% and 0.7%, respectively, for the first quarter of 2019.

Notably, the consensus mark for revenues from Health Solutions, Retirement Solutions and Reinsurance Solutions translate to a year-over-year rise of 3.3%, 2.6% and 2.3%, respectively. The Zacks Consensus Estimate for first-quarter total revenues is pegged at $3.2 billion, suggesting 4% growth from the year-ago reported figure.

For quarter to be reported, the Zacks Consensus Estimate for the bottom line stands at $3.31, implying 11.4% growth from the prior-year reported figure. This upside is likely to be mainly favored by segmental growth.

However, the company might have incurred mounting expenses due to organic and inorganic investments. Aon is likely to endure high financial leverage, which has been piling up since 2014 due to an increase in commercial paper outstanding.

The company has possibly continued with its efficient capital deployment through share repurchases and dividend payouts during the first quarter of 2019.

What the Quantitative Model States

Our proven model does not conclusively indicate that Aon is likely to beat on earnings in the quarter to be reported. This is because a stock needs to have the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen, which is not the case here.

Earnings ESP: Aon has an Earnings ESP of -1.16%. This is because the Most Accurate Estimate is pegged at $3.28, lower than the Zacks Consensus Estimate of $3.31. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise | Aon plc Quote

Zacks Rank: Aon currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, when combined with a negative ESP in the combination, surprise prediction is left inconclusive.

We caution against the Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some stocks worth considering from the insurance industry with the perfect mix of elements to surpass estimates in the next releases are as follows:

Everest Re Group, Ltd. RE is set to report first-quarter earnings on May 6. The stock has a Zacks Rank of 3 and an Earnings ESP of +10.82%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Allstate Corporation ALL has an Earnings ESP of +5.02%. This Zacks #3 Ranked player is scheduled to release first-quarter earnings on May 1.

Renaissance Holdings Ltd. RNR is slated to announce first-quarter earnings on May 7. The stock has an Earnings ESP of +3.43% and a Zacks Rank #2.

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