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Aon (AON) Hits 52 Week High: More Room for Upside Left?
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On Aug 13, shares of Aon plc (AON - Free Report) touched a 52-week high of $277.86 before closing the session a tad lower at $277.24.
The insurance broker’s stock has increased 6.6% ever since its earnings release, comparing favorably with the industry’s average of 3.5%.
Image Source: Zacks Investment Research
Other companies in the same space, such as Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Willis Towers Watson Public Limited Company have also gained 3%, 2.5% and 6.4%, respectively, in the same time frame.
What’s Driving This Outperformance?
Strong results buoyed investors’ optimism. Aon’s second-quarter earnings of $2.29 per share beat the Zacks Consensus Estimate by 27.2% and climbed 16.8% year over year on higher revenues. Results benefited from better revenues and solid contributions from its Reinsurance Solutions, Retirement Solutions, Data & Analytic Services, Health Solutions and Commercial Risk Solutions segments.
Total revenues improved 16% year over year to $2.9 billion, comprising organic revenue growth of 11%, 4% favorable impact from forex translation and a 1% positive impact from buyouts, divestitures and other. This upside can primarily be attributed to improved segmental performances at Reinsurance Solutions, Retirement Solutions, Health Solutions, Data & Analytic Services and Commercial Risk Solutions. Moreover, the top line outpaced the consensus mark by 9.2%.
The company witnessed a steady bottom-line improvement over the last many years on the back of its strategic cost-curbing measures. In the first six months of 2021, the bottom line rose 12.2% year over year.
Aon continues to divest non-core operations to streamline its business. In the second quarter of 2021, it entered into agreements to sell its U.S. retirement business to Aquiline, Aon Retiree Health Exchange to Alight, and its retirement and investment business in Germany to Lane Clark & Peacock LLP, etc. Detachment of insignificant businesses is expected to simplify the company’s operations, allowing it to focus on more profitable activities, generating higher return on equity.
The company’s restructuring efforts to reduce workforce and rationalize technology aided it to deliver reach savings last year. We expect the same to provide some cushion to the margins going forward.
Despite the current economic situation in this pandemic-ravaged world, the company had resumed its share buyback plan in the third quarter of 2020, which was attractive to investors.
Aon will continue repurchasing shares while maintaining higher-than-normal levels of cash for the near future. In the second quarter, it bought back shares worth $240 million. On the last earnings call, management said that it expects repurchasing shares to sustain the highest return-on-capital opportunity for effective allocation of funds.
The company’s enhanced portfolio and solvency position are likely to position it well for long-term growth. This currently Zacks Rank #2 (Buy) player is poised to benefit from its strategic initiatives. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its expenses are expected to decline going forward, backed by its efficient cost management.
On the last investors’ call, management said that it expects organic revenue growth in mid-single digit or above for 2021 and over the long term.
The stock holds prospects, which makes it a good investment bet.
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Aon (AON) Hits 52 Week High: More Room for Upside Left?
On Aug 13, shares of Aon plc (AON - Free Report) touched a 52-week high of $277.86 before closing the session a tad lower at $277.24.
The insurance broker’s stock has increased 6.6% ever since its earnings release, comparing favorably with the industry’s average of 3.5%.
Image Source: Zacks Investment Research
Other companies in the same space, such as Marsh & McLennan Companies, Inc. (MMC - Free Report) , Brown & Brown, Inc. (BRO - Free Report) and Willis Towers Watson Public Limited Company have also gained 3%, 2.5% and 6.4%, respectively, in the same time frame.
What’s Driving This Outperformance?
Strong results buoyed investors’ optimism. Aon’s second-quarter earnings of $2.29 per share beat the Zacks Consensus Estimate by 27.2% and climbed 16.8% year over year on higher revenues. Results benefited from better revenues and solid contributions from its Reinsurance Solutions, Retirement Solutions, Data & Analytic Services, Health Solutions and Commercial Risk Solutions segments.
Total revenues improved 16% year over year to $2.9 billion, comprising organic revenue growth of 11%, 4% favorable impact from forex translation and a 1% positive impact from buyouts, divestitures and other. This upside can primarily be attributed to improved segmental performances at Reinsurance Solutions, Retirement Solutions, Health Solutions, Data & Analytic Services and Commercial Risk Solutions. Moreover, the top line outpaced the consensus mark by 9.2%.
The company witnessed a steady bottom-line improvement over the last many years on the back of its strategic cost-curbing measures. In the first six months of 2021, the bottom line rose 12.2% year over year.
Aon continues to divest non-core operations to streamline its business. In the second quarter of 2021, it entered into agreements to sell its U.S. retirement business to Aquiline, Aon Retiree Health Exchange to Alight, and its retirement and investment business in Germany to Lane Clark & Peacock LLP, etc. Detachment of insignificant businesses is expected to simplify the company’s operations, allowing it to focus on more profitable activities, generating higher return on equity.
The company’s restructuring efforts to reduce workforce and rationalize technology aided it to deliver reach savings last year. We expect the same to provide some cushion to the margins going forward.
Despite the current economic situation in this pandemic-ravaged world, the company had resumed its share buyback plan in the third quarter of 2020, which was attractive to investors.
Aon will continue repurchasing shares while maintaining higher-than-normal levels of cash for the near future. In the second quarter, it bought back shares worth $240 million. On the last earnings call, management said that it expects repurchasing shares to sustain the highest return-on-capital opportunity for effective allocation of funds.
The company’s enhanced portfolio and solvency position are likely to position it well for long-term growth. This currently Zacks Rank #2 (Buy) player is poised to benefit from its strategic initiatives. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Its expenses are expected to decline going forward, backed by its efficient cost management.
On the last investors’ call, management said that it expects organic revenue growth in mid-single digit or above for 2021 and over the long term.
The stock holds prospects, which makes it a good investment bet.