We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Why You Should Hold on to Aon plc (AON) Stock Right Now
Read MoreHide Full Article
London-based insurance broker Aon plc’s (AON - Free Report) prospects look bright owing to several tailwinds.
Over the last three years, the company has been displaying substantial growth via tuck-in acquisitions, mergers and strategic alliances. In 2016, Aon purchased Univers to significantly enhance its client servicing ability. During the first two months of first-quarter 2017, Aon completed the buyout of Brazilian benefits brokerage and solutions provider, Admix. We expect initiatives like these to continue bolstering Aon’s inorganic growth potential.
Aon has also been divesting non-core operations to streamline its core business. In the first quarter of 2017, it partnered with The Blackstone Group to sell its benefits administration and HR BPO platform to the latter. These divestures should help the company to focus on more profitable operations and generate higher return on equity.
This apart, the company has been launching several upgraded products in order to maintain its competitive edge. Its client engagement program – Äon Client Promise – has driven nearly 90% client retention rate in 2016. Another initiative, Aon InPoint, helped to deal with market leading data and analytics. Furthermore, Aon Client Treaty is deemed to be the largest underwritten portfolio of risk. In 2016, Aon launched EU Data Protect to help protect organizations from some of the potential financial impacts of EU General Data Protection Regulation Act.
We note that Aon’s capital strength has been supporting its initiatives. Its operating cash flow increased at a five-year CAGR (2010–2015) of 20.7%, in turn, helping the company implement efficient capital-management strategies. In 2016, Aon paid $258 million of cash dividend and repurchased shares worth $1.3 billion.
However, the stock did not find favor with shareholders in spite of the aforesaid positives. Over the last one year, the stock gained only 13%, whereas the Zack categorized Insurance Brokerage industry displayed growth of 23%.
The underperformance can be attributed to Aon’s heavy debt burden, higher interest expenses and increasing borrowing costs. Total debt burden increased at a five-year CAGR (2010–2015) of 4.81% due to an increase in commercial paper outstanding. As a result, its interest expenses rose 3.4% year over year to $273 million in 2016, putting pressure on the margin.
Along with financial risks, stiff competition, ongoing legal hassles and foreign currency fluctuations contributed to the stock’s underperformance.
Zacks Rank and Stocks to Consider
Aon presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Argo Group International Holdings, Ltd. and The Progressive Corporation (PGR - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers Property and Casualty (P&C) insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Argo Group International Holdings underwrites specialty insurance and reinsurance products in the P&C market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.
The Progressive Corporation offers personal and commercial P&C insurance, and other specialty P&C insurance and related services, primarily in the United States. The company delivered a positive surprise in two of the last four quarters with an average beat of 1.32%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Why You Should Hold on to Aon plc (AON) Stock Right Now
London-based insurance broker Aon plc’s (AON - Free Report) prospects look bright owing to several tailwinds.
Over the last three years, the company has been displaying substantial growth via tuck-in acquisitions, mergers and strategic alliances. In 2016, Aon purchased Univers to significantly enhance its client servicing ability. During the first two months of first-quarter 2017, Aon completed the buyout of Brazilian benefits brokerage and solutions provider, Admix. We expect initiatives like these to continue bolstering Aon’s inorganic growth potential.
Aon has also been divesting non-core operations to streamline its core business. In the first quarter of 2017, it partnered with The Blackstone Group to sell its benefits administration and HR BPO platform to the latter. These divestures should help the company to focus on more profitable operations and generate higher return on equity.
This apart, the company has been launching several upgraded products in order to maintain its competitive edge. Its client engagement program – Äon Client Promise – has driven nearly 90% client retention rate in 2016. Another initiative, Aon InPoint, helped to deal with market leading data and analytics. Furthermore, Aon Client Treaty is deemed to be the largest underwritten portfolio of risk. In 2016, Aon launched EU Data Protect to help protect organizations from some of the potential financial impacts of EU General Data Protection Regulation Act.
We note that Aon’s capital strength has been supporting its initiatives. Its operating cash flow increased at a five-year CAGR (2010–2015) of 20.7%, in turn, helping the company implement efficient capital-management strategies. In 2016, Aon paid $258 million of cash dividend and repurchased shares worth $1.3 billion.
However, the stock did not find favor with shareholders in spite of the aforesaid positives. Over the last one year, the stock gained only 13%, whereas the Zack categorized Insurance Brokerage industry displayed growth of 23%.
The underperformance can be attributed to Aon’s heavy debt burden, higher interest expenses and increasing borrowing costs. Total debt burden increased at a five-year CAGR (2010–2015) of 4.81% due to an increase in commercial paper outstanding. As a result, its interest expenses rose 3.4% year over year to $273 million in 2016, putting pressure on the margin.
Along with financial risks, stiff competition, ongoing legal hassles and foreign currency fluctuations contributed to the stock’s underperformance.
Zacks Rank and Stocks to Consider
Aon presently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. (AFG - Free Report) , Argo Group International Holdings, Ltd. and The Progressive Corporation (PGR - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers Property and Casualty (P&C) insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Argo Group International Holdings underwrites specialty insurance and reinsurance products in the P&C market worldwide. The company delivered positive surprises in all of the last four quarters with an average beat of 36.54%.
The Progressive Corporation offers personal and commercial P&C insurance, and other specialty P&C insurance and related services, primarily in the United States. The company delivered a positive surprise in two of the last four quarters with an average beat of 1.32%.
More Stock News: This Is Bigger than the iPhone!
It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.
Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020. Click here for the 6 trades >>