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AON to Announce Q1 Earnings: What's in Store for the Stock?

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Aon plc (AON - Free Report) is set to report first-quarter 2022 results on Apr 29, before the opening bell.

In the last reported quarter, the leading risk management service provider reported earnings per share of $3.71, beating the Zacks Consensus Estimate by 9.1%, backed by solid contributions from its Reinsurance Solutions, Commercial Risk Solutions, Health Solutions and Wealth Solutions segments. Also, decreased operating expenses aided the bottom line.

Let’s see how things have shaped up prior to the first-quarter earnings announcement.

Trend in Estimate Revision

The Zacks Consensus Estimate for first-quarter earnings per share of $4.86 has witnessed three upward revisions and no downward movement in the past 30 days. The estimated figure suggests an increase of 13.6% from the prior-year reported number. The consensus estimate for first-quarter revenues of $3.8 billion indicates a 6.3% increase from the year-ago reported figure.

Aon beat the consensus estimate in each of the prior four quarters, with the average being 11.6%. This is depicted in the graph below:

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise

Aon plc price-eps-surprise | Aon plc Quote

Factors to Note

Aon is likely to have witnessed significant organic revenue growth in the first quarter, owing to an improvement in core areas. The company is likely to have witnessed higher free cash flow, driven by strong operational improvement. The Zacks Consensus Estimate for consolidated organic revenue growth indicates 27% year-over-year growth.

Commercial Risk Solutions’ revenues are likely to have gained from new business generation, robust retention and management of the renewal book portfolio. Increased travel-related spending is expected to have aided the Data & Analytics Services business, which has become part of Commercial Risk Solutions. The Zacks Consensus Estimate for the Commercial Risk Solutions segment’s revenues is pegged at $1,765 million, suggesting an increase from the prior-year reported figure of $1,289 million.

The Zacks Consensus Estimate for the Health Solutions segment’s first-quarter revenues is pegged at $562 million, suggesting an improvement from the year-ago period’s $536 million. This potential upside might have stemmed from growth in the more discretionary portions of the business, led by an increase in project-related work and strength in voluntary benefits.

Also, the consensus mark for Reinsurance Solutions’ revenues is pegged at $974 million, indicating an increase from $922 million a year ago. It is likely to have witnessed growth in the to-be-reported quarter on the back of consistent new business generation and growth in capital market transactions. All these factors are likely to have positioned the company for year-over-year growth.

Yet, the consensus mark for organic revenue growth in AON’s commercial risk solutions business indicates a 7.9% year-over-year decline. Also, escalating expenses due to substantial investments in the priority areas for long-term growth and an increase in certain discretionary expenses are likely to have affected bottom-line growth, making an earnings beat uncertain.

Earnings Whispers

Our proven model does not conclusively predict 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 chances of an earnings beat. That is not the case here, as you will see below.

Earnings ESP: The company’s Earnings ESP is -0.14%. This is because the Most Accurate Estimate is currently pegged at $4.85 per share, lower than the Zacks Consensus Estimate of $4.86.

You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

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

Stocks to Consider

While an earnings beat looks uncertain for Aon, here are some companies in the Finance space that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat this time around:

Armada Hoffler Properties, Inc. (AHH - Free Report) has an Earnings ESP of +2.84% and a Zacks Rank of 2.

The Zacks Consensus Estimate for Armada Hoffler’s bottom line for the to-be-reported quarter indicates a 7.7% year-over-year rise. Armada Hoffler beat earnings estimates in each of the last four quarters, with an average of 8.1%.

The Allstate Corporation (ALL - Free Report) has an Earnings ESP of +0.85% and is a Zacks #3 Ranked player.

The Zacks Consensus Estimate for Allstate’s earnings per share for the to-be-reported quarter has improved 5.1% in the past 30 days. Allstate beat earnings estimates thrice in the last four quarters, with an average surprise of 7.7%.

Cigna Corporation (CI - Free Report) has an Earnings ESP of +6.26% and a Zacks Rank #2.

The Zacks Consensus Estimate for Cigna’s bottom line for the to-be-reported quarter indicates an 8.5% year-over-year increase. Cigna beat earnings estimates in each of the last four quarters, with an average of 6%.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.