Company Description

Aon provides risk management services, insurance and reinsurance brokerage and human resource consulting and outsourcing. The company's risk management services segment offers solutions for property liability, general liability, professional liability, directors' and officers' liability, workers' compensation and various healthcare products along with others. Its insurance and reinsurance brokerage segment offers property and casualty reinsurance and specialty lines, which includes medical malpractice, accident, life, and health, as well as capital management transaction and advisory services. Aon PLC, formally known as Aon Corporation, is headquartered in Chicago, Illinois.

AON Meets or Beats Expectations in Four of Last Six Quarters

AON topped the Zacks Consensus Estimate in three of the last six quarters. The other three quarters saw two earnings misses and one quarter that was in line with expectations. Over the three positive earnings surprises, the company topped estimates by an average of $0.017 per share which translated into a 2% surprise.

Despite the positive surprises, Wall Street hasn't taken much notice and as a result the stock has sold off on average following the earnings report. The average move for the three positive earnings surprises was less than -1%.

The largest impact on shares came following the December 2010 quarter. AON reported earnings of $0.84 per share, $0.03 ahead of the Zacks Consensus Estimate. That quarter saw revenues of $2.9 billion, about $69 million ahead of expectations. The beats on the top and bottom line helped lift the stock higher by 5.5% in the session following the report.

AON Most Recent Report

On May 4, the company reported earnings of $0.98, $0.08 less than the Zacks Consensus Estimate of $1.06. 7.5% negative earnings surprise helped push the stock lower by $3.27 or 6.4% in the session following the release. Revenue in the March 2011 quarter was in line with expectations and grew 3% from the previous year.

AON Sees Estimates Moving Higher

Estimates for AON have been rising of late. The Zacks Consensus Estimate for 2012 for AON Automotive stood at $3.63 as of January 2012. The consensus has since moved higher to $4.18. Over the same time period estimates for 2013 have moved from $4.17 to $4.77. The implied earnings growth rate of more than 14% is just what aggressive growth investors are seeking.

Valuation

AON trades in line with most of the valuation metrics that aggressive growth investors tend to follow. The trailing PE multiple of 13x is below the 16x industry average. The forward PE is mostly in line with the industry average of 10.2x. Price to book of 1.75x is still well below the 3x metric that begins to become too expensive, but is still higher than the 1x industry average. The key in the valuation that makes AON stand out is the consistent revenue growth the company has displayed versus the contraction that has been witnessed by the industry average.

The Chart

A quick look at price and consensus chart shows a choppy stock and an equally choppy earnings estimate line history. The years 2009 -2013 have seen estimates start high and finish low, not exactly what aggressive growth investor want to see. That stated, the earnings growth, represented by the gap between lines, has increased of late and there has been a significant positive revision to 2012 and 2013 estimates. The improved outlook for future estimates and its attractive valuation makes AON a stock worth a deeper look. AON is a Zacks #1 Rank (Strong Buy).

Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service

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