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What's in the Cards for Aon's (AON) Q4 Earnings Results?

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Aon plc (AON - Free Report) is slated to report fourth-quarter 2020 results on Feb 5, before the opening bell.

Q4 Estimates 

The Zacks Consensus Estimate for Aon’s fourth-quarter earnings is pegged at $2.48 per share, indicating a decline of 2% from the prior-year quarter.

However, the consensus mark for revenues stands at $2.8 billion, suggesting a decline of 1.8% from the year-ago reported figure.

Factors to Note

The company’s segments — Commercial Risk Solutions, Data & Analytic Services, Health Solutions and Retirement Solutions — are likely to display muted performance. This in turn might have dented the company’s top line in the to-be-reported quarter.

The Zacks Consensus Estimate for the Commercial Risk Solutions segment’s third-quarter revenues are pegged at $1.32 billion, suggesting a decline of 0.7% from the prior-year quarter. The segment’s fourth-quarter results are likely to reflect pressure on the more discretionary parts of its business, which include transaction liability, construction and project work. However, strong core areas may have benefited the segment.

Reduced travel and events practice on account of the COVID-19 pandemic might have impacted the Data & Analytics Services segment. The consensus mark for the segment’s revenues stands at $287 million, indicating a decline of 1.4% from the year-ago reported figure.

Moreover, the Zacks Consensus Estimate for the Health Solutions segment’s fourth-quarter revenues is pegged at $575 million, suggesting a slump of 1.7% from the year-ago reported figure. Lower employment level, due to the pandemic, is likely to have put pressure on the more discretionary parts of this business.

Also, pressure on the more discretionary parts of the company’s retirement business, which specifically includes human capital, may have impacted the Retirement Solutions segment in the fourth quarter. The Zacks Consensus Estimate for the segment’s revenues stands at $475 million, indicating a fall of 3.8% from the year-ago reported figure.

The Reinsurance Solutions segment is likely to have witnessed growth in the to-be-reported quarter on the back of constant new business generation. The consensus estimate for the Reinsurance Solutions segment’s third-quarter revenues stands at $196 million, indicating an improvement of 4.8% from the prior-year quarter.

The company has likely continued with its share repurchase, which added additional cushion to its overall performance.

On its last earnings call, the company expected an unfavourable impact of 2 cents per share from foreign exchange in fourth-quarter.

Finally, the company might have incurred higher costs in the to-be-reported quarter on account of substantial investments in priority areas for long-term growth, increase in certain discretionary expenses.

What Our Quantitative Model Predicts

Our proven model conclusively predicts an earnings beat for Aon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat as you can see here:

Earnings ESP: Aon has an Earnings ESP of +0.30%. This is because the Most Accurate Estimate is pegged at $2.49, higher than the Zacks Consensus Estimate of $2.48.You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise

Aon plc price-eps-surprise | Aon plc Quote

Zacks Rank: Aon carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q3 Earnings and Surprise History

Aon’s third-quarter 2020 operating earnings of $1.53 per share surpassed the Zacks Consensus Estimate by 1.3%. Further, the bottom line improved 5.5% year over year on the back of reduced operating expenses.

The company has beat estimates in three of the trailing four quarters, while missing the same once. It has a trailing four-quarter earnings surprise of 1.12%, on average.

Stocks to Consider

Some stocks worth considering from the insurance space with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

American International Group, Inc. (AIG - Free Report) currently has a Zacks Rank of 3 and an Earnings ESP of +0.85%.

Cincinnati Financial Corporation (CINF - Free Report) is currently Zacks #3 Ranked and has an Earnings ESP of +2.72%.

Manulife Financial Corp (MFC - Free Report) has an Earnings ESP of +0.95% and is presently a #3 Ranked player.

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