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.
Can Higher Expenses Play Spoilsport for AON's Q4 Earnings?
Read MoreHide Full Article
Aon plc (AON - Free Report) is set to report its fourth-quarter 2023 results on Feb 2, before the opening bell. A strong Reinsurance Solutions performance is expected in the quarter under review, along with increasing costs.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $4.07 suggests a 4.6% increase from the prior-year figure of $3.89. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $3.4 billion indicates a 7.1% increase from the year-ago reported figure.
AON beat the consensus estimate for earnings in two of the trailing four quarters and missed on the other two occasions, with the average surprise being 1.4%. This is depicted in the graph below:
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AON’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global risk management services provider’s adjusted earnings per share of $2.32 beat the Zacks Consensus Estimate by 4%, primarily due to higher fiduciary investment income, strength in core property and casualty and strong segmental contributions. However, the upside was partly offset by an elevated operating expense level.
Commercial Risk Solutions’ performance in the fourth quarter is likely to have gained from new business growth, robust retention and skillful management of the renewal book portfolio. Strong growth in various geographical regions, including the Pacific and EMEA, is expected to have had a positive impact on their performance.
The Zacks Consensus Estimate for the Commercial Risk Solutions line’s revenues indicates 6.3% growth from $1.8 billion a year ago, whereas our model predicts a more than 5% increase. We expect the unit to witness 5% organic revenue growth in the quarter under discussion.
The consensus mark for the Health Solutions line’s fourth-quarter revenues suggests 8.3% growth from the year-ago level, while our projection anticipates an 8% increase. The segment's growth is likely to have been supported by an increase in core health and benefits brokerage. Additionally, the growing strength in Consumer Benefit Solutions and an enhanced data and advisory solutions suite are expected to have positively impacted the unit's results in the fourth quarter.
The Zacks Consensus Estimate for Reinsurance Solutions' revenues indicates growth of more than 11% compared with the $281 million from a year ago, while our model forecasts a 9% increase. It is expected to have witnessed growth in the to-be-reported quarter on the back of new business generation, strong retention and Strategy and Technology Group’s performance. Additionally, improvements in facultative placements are likely to have had a positive impact on the unit's performance.
The consensus estimate for fourth-quarter revenues in the Wealth Solutions segment suggests an almost 5% increase from the previous year, whereas our model foresees a 6% rise. The unit is likely to have been supported by heightened demand for advisory services, project-related activities and retirement growth during the quarter under review.
While the factors mentioned above are expected to contribute to the company's year-over-year growth, increased expenses from significant investments in priority areas for long-term growth, coupled with an uptick in certain discretionary and other costs, may have tempered the overall positive outlook. This is likely to have partially offset the upside, making an earnings beat uncertain.
Our model suggests the total operating costs in the fourth quarter to have increased nearly 5%, primarily attributed to increased expenses related to higher compensation and benefits. Specifically, the estimate for information technology expenses is set at more than $138 million, while compensation and benefits cost is pegged at more than $1.6 billion.
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 has an Earnings ESP of -3.54%. This is because the Most Accurate Estimate currently stands at $3.93 per share, lower than the Zacks Consensus Estimate of $4.07.
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 #3.
Stocks to Consider
While an earnings beat looks uncertain for AON, here are some companies from the broader 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:
The Zacks Consensus Estimate for CNO Financial’s bottom line for the to-be-reported quarter suggests a 51.8% year-over-year jump to 85 cents per share. The estimate remained stable over the past week. The consensus mark for CNO’s revenues is pegged at $934.1 million.
Everest Group, Ltd. (EG - Free Report) has an Earnings ESP of +1.18% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Everest’s bottom line for the to-be-reported quarter indicates a 19.8% year-over-year increase. The estimate remained stable over the past week. Furthermore, EG beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 24.5%.
Arch Capital Group Ltd. (ACGL - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Arch Capital’s bottom line for the to-be-reported quarter is pegged at $1.94 per share, which increased by 4 cents in the past month. ACGL beat earnings estimates in all the past four quarters, with an average surprise of 35.2%.
Image: Bigstock
Can Higher Expenses Play Spoilsport for AON's Q4 Earnings?
Aon plc (AON - Free Report) is set to report its fourth-quarter 2023 results on Feb 2, before the opening bell. A strong Reinsurance Solutions performance is expected in the quarter under review, along with increasing costs.
What Do the Estimates Say?
The Zacks Consensus Estimate for fourth-quarter earnings per share of $4.07 suggests a 4.6% increase from the prior-year figure of $3.89. The consensus mark remained stable over the past week. The consensus estimate for fourth-quarter revenues of $3.4 billion indicates a 7.1% increase from the year-ago reported figure.
AON beat the consensus estimate for earnings in two of the trailing four quarters and missed on the other two occasions, with the average surprise being 1.4%. This is depicted in the graph below:
Aon plc Price and EPS Surprise
Aon plc price-eps-surprise | Aon plc Quote
Before we get into what to expect for the to-be-reported quarter in detail, it’s worth taking a look at AON’s previous-quarter performance first.
Q3 Earnings Rewind
In the last reported quarter, the leading global risk management services provider’s adjusted earnings per share of $2.32 beat the Zacks Consensus Estimate by 4%, primarily due to higher fiduciary investment income, strength in core property and casualty and strong segmental contributions. However, the upside was partly offset by an elevated operating expense level.
Now, let’s see how things have shaped up before the fourth-quarter earnings announcement.
Q4 Factors to Note
Commercial Risk Solutions’ performance in the fourth quarter is likely to have gained from new business growth, robust retention and skillful management of the renewal book portfolio. Strong growth in various geographical regions, including the Pacific and EMEA, is expected to have had a positive impact on their performance.
The Zacks Consensus Estimate for the Commercial Risk Solutions line’s revenues indicates 6.3% growth from $1.8 billion a year ago, whereas our model predicts a more than 5% increase. We expect the unit to witness 5% organic revenue growth in the quarter under discussion.
The consensus mark for the Health Solutions line’s fourth-quarter revenues suggests 8.3% growth from the year-ago level, while our projection anticipates an 8% increase. The segment's growth is likely to have been supported by an increase in core health and benefits brokerage. Additionally, the growing strength in Consumer Benefit Solutions and an enhanced data and advisory solutions suite are expected to have positively impacted the unit's results in the fourth quarter.
The Zacks Consensus Estimate for Reinsurance Solutions' revenues indicates growth of more than 11% compared with the $281 million from a year ago, while our model forecasts a 9% increase. It is expected to have witnessed growth in the to-be-reported quarter on the back of new business generation, strong retention and Strategy and Technology Group’s performance. Additionally, improvements in facultative placements are likely to have had a positive impact on the unit's performance.
The consensus estimate for fourth-quarter revenues in the Wealth Solutions segment suggests an almost 5% increase from the previous year, whereas our model foresees a 6% rise. The unit is likely to have been supported by heightened demand for advisory services, project-related activities and retirement growth during the quarter under review.
While the factors mentioned above are expected to contribute to the company's year-over-year growth, increased expenses from significant investments in priority areas for long-term growth, coupled with an uptick in certain discretionary and other costs, may have tempered the overall positive outlook. This is likely to have partially offset the upside, making an earnings beat uncertain.
Our model suggests the total operating costs in the fourth quarter to have increased nearly 5%, primarily attributed to increased expenses related to higher compensation and benefits. Specifically, the estimate for information technology expenses is set at more than $138 million, while compensation and benefits cost is pegged at more than $1.6 billion.
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 has an Earnings ESP of -3.54%. This is because the Most Accurate Estimate currently stands at $3.93 per share, lower than the Zacks Consensus Estimate of $4.07.
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 #3.
Stocks to Consider
While an earnings beat looks uncertain for AON, here are some companies from the broader 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:
CNO Financial Group, Inc. (CNO - Free Report) has an Earnings ESP of +8.24% and a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for CNO Financial’s bottom line for the to-be-reported quarter suggests a 51.8% year-over-year jump to 85 cents per share. The estimate remained stable over the past week. The consensus mark for CNO’s revenues is pegged at $934.1 million.
Everest Group, Ltd. (EG - Free Report) has an Earnings ESP of +1.18% and is a Zacks #3 Ranked player.
The Zacks Consensus Estimate for Everest’s bottom line for the to-be-reported quarter indicates a 19.8% year-over-year increase. The estimate remained stable over the past week. Furthermore, EG beat earnings estimates in three of the past four quarters and missed once, with the average surprise being 24.5%.
Arch Capital Group Ltd. (ACGL - Free Report) has an Earnings ESP of +1.24% and a Zacks Rank of 3.
The Zacks Consensus Estimate for Arch Capital’s bottom line for the to-be-reported quarter is pegged at $1.94 per share, which increased by 4 cents in the past month. ACGL beat earnings estimates in all the past four quarters, with an average surprise of 35.2%.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.