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Reasons Why Investors Should Hold on to AON Shares for Now
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Aon plc (AON - Free Report) is well-positioned for growth, leveraging strong retention in multiple segments, new business generation and favorable impacts of currency translation. Strong core property and casualty business, organic revenue growth, acquisitions and partnerships continue to be pivotal drivers.
Headquartered in Dublin, Ireland, AON offers risk management services, insurance, facultative reinsurance, brokerage and other services. It operates in more than 120 countries and has a market cap of $66.2 billion. With solid prospects, this Zacks Rank #3 (Hold) stock is deemed worthwhile for holding on to at the moment.
In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.
The consensus estimate for AON's 2024 revenues stands at $14.3 billion, which indicates 6.9% year-over-year growth. The company expects its revenues to witness mid-single-digit or higher organic growth for 2024 and beyond. We expect its Commercial Risk Solutions and Health Solutions businesses to play significant roles in its top-line growth.
For 2024, we expect 4% organic revenue growth in Commercial Risk Solutions, exceeding $7.3 billion in total, backed by well-performing construction, property and casualty businesses in U.S. operations. Strength in retail brokerage and new business growth will also aid the segment.
The Health Solutions segment is anticipated to experience 7% organic revenue growth, reaching more than $2.6 billion, buoyed by expanding core health and benefits brokerage business. Strength in Consumer Benefit Solutions and an improvement in the Talent business are likely to drive further growth.
Our model projects around 7% organic revenue growth in Reinsurance Solutions, reaching more than $2.6 billion, driven by the new business and strong retention rates. Growth in facultative placements and investment banking can also play crucial roles in the segment’s advancement.
Aon employs acquisitions and partnerships as key growth strategies, focusing on expanding its capabilities, market reach, geographical footprint and product portfolio. It also doesn’t shy away from shedding non-core assets to improve margins. These initiatives position Aon for sustained long-term growth while boosting profitability.
Its trailing 12-month return on capital of 29.3% has outpaced the industry's average of 12%. This underscores the company's adeptness in generating substantial returns relative to the capital invested compared to industry benchmarks. The Zacks Consensus Estimate for AON’s 2024 earnings is pegged at $15.78 per share, which indicates 11.6% year-over-year growth.
Its cash-generating abilities help the company take shareholder value-boosting measures. Although AON expects free cash flow to witness a decline in the short term, management remains optimistic to revert to its history of double-digit free cash flow growth in the long term. Growing operating income and continued working capital improvements are expected to help in this regard. Last year, AON bought back shares worth $800 million and had around $3.3 billion of authorization left under its share repurchase program at year-end.
Risks
However, there are some factors that investors should keep a careful eye on.
Aon exited the fourth quarter with cash and cash equivalents of $778 million, which contrasts with a substantial long-term debt of $10 billion. Also, short-term debt and the current portion of long-term debt were at $1.2 billion.
The debt-heavy balance sheet has led to an increase in interest expenses. During 2023, interest expenses surged by 19.2% year over year. For 2024, we expect the metric to jump nearly 14% to $550.5 million. Nevertheless, we believe that a systematic and strategic plan of action will drive growth and reduce its leverage in the long term.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 full-year earnings indicates a 28.3% year-over-year increase. It beat earnings estimates in two of the past four quarters and met twice, with an average surprise of 5.1%. Also, the consensus mark for RYAN’s 2024 full-year revenues suggests 19.5% year-over-year growth.
The consensus mark for Root’s 2024 full-year earnings indicates a 23.1% year-over-year improvement. The earnings estimate has witnessed one upward estimate revision in the past month against no movement in the opposite direction. Furthermore, the consensus estimate for ROOT’s 2024 full-year revenues suggests 101.8% year-over-year growth.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.29 per share, which indicates 17.1% year-over-year growth. The estimate jumped by 9 cents over the past month. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.2%.
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Reasons Why Investors Should Hold on to AON Shares for Now
Aon plc (AON - Free Report) is well-positioned for growth, leveraging strong retention in multiple segments, new business generation and favorable impacts of currency translation. Strong core property and casualty business, organic revenue growth, acquisitions and partnerships continue to be pivotal drivers.
Headquartered in Dublin, Ireland, AON offers risk management services, insurance, facultative reinsurance, brokerage and other services. It operates in more than 120 countries and has a market cap of $66.2 billion. With solid prospects, this Zacks Rank #3 (Hold) stock is deemed worthwhile for holding on to at the moment.
Aon plc Price and Consensus
Aon plc price-consensus-chart | Aon plc Quote
In this analysis, we'll explore the growth drivers and estimates and highlight the key factors investors should monitor. Let’s delve deeper.
The consensus estimate for AON's 2024 revenues stands at $14.3 billion, which indicates 6.9% year-over-year growth. The company expects its revenues to witness mid-single-digit or higher organic growth for 2024 and beyond. We expect its Commercial Risk Solutions and Health Solutions businesses to play significant roles in its top-line growth.
For 2024, we expect 4% organic revenue growth in Commercial Risk Solutions, exceeding $7.3 billion in total, backed by well-performing construction, property and casualty businesses in U.S. operations. Strength in retail brokerage and new business growth will also aid the segment.
The Health Solutions segment is anticipated to experience 7% organic revenue growth, reaching more than $2.6 billion, buoyed by expanding core health and benefits brokerage business. Strength in Consumer Benefit Solutions and an improvement in the Talent business are likely to drive further growth.
Our model projects around 7% organic revenue growth in Reinsurance Solutions, reaching more than $2.6 billion, driven by the new business and strong retention rates. Growth in facultative placements and investment banking can also play crucial roles in the segment’s advancement.
Aon employs acquisitions and partnerships as key growth strategies, focusing on expanding its capabilities, market reach, geographical footprint and product portfolio. It also doesn’t shy away from shedding non-core assets to improve margins. These initiatives position Aon for sustained long-term growth while boosting profitability.
Its trailing 12-month return on capital of 29.3% has outpaced the industry's average of 12%. This underscores the company's adeptness in generating substantial returns relative to the capital invested compared to industry benchmarks. The Zacks Consensus Estimate for AON’s 2024 earnings is pegged at $15.78 per share, which indicates 11.6% year-over-year growth.
Its cash-generating abilities help the company take shareholder value-boosting measures. Although AON expects free cash flow to witness a decline in the short term, management remains optimistic to revert to its history of double-digit free cash flow growth in the long term. Growing operating income and continued working capital improvements are expected to help in this regard. Last year, AON bought back shares worth $800 million and had around $3.3 billion of authorization left under its share repurchase program at year-end.
Risks
However, there are some factors that investors should keep a careful eye on.
Aon exited the fourth quarter with cash and cash equivalents of $778 million, which contrasts with a substantial long-term debt of $10 billion. Also, short-term debt and the current portion of long-term debt were at $1.2 billion.
The debt-heavy balance sheet has led to an increase in interest expenses. During 2023, interest expenses surged by 19.2% year over year. For 2024, we expect the metric to jump nearly 14% to $550.5 million. Nevertheless, we believe that a systematic and strategic plan of action will drive growth and reduce its leverage in the long term.
Key Picks
Investors interested in the broader Finance space can look at some better-ranked stocks like Ryan Specialty Holdings, Inc. (RYAN - Free Report) , Root, Inc. (ROOT - Free Report) and Brown & Brown, Inc. (BRO - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Ryan Specialty’s 2024 full-year earnings indicates a 28.3% year-over-year increase. It beat earnings estimates in two of the past four quarters and met twice, with an average surprise of 5.1%. Also, the consensus mark for RYAN’s 2024 full-year revenues suggests 19.5% year-over-year growth.
The consensus mark for Root’s 2024 full-year earnings indicates a 23.1% year-over-year improvement. The earnings estimate has witnessed one upward estimate revision in the past month against no movement in the opposite direction. Furthermore, the consensus estimate for ROOT’s 2024 full-year revenues suggests 101.8% year-over-year growth.
The Zacks Consensus Estimate for Brown & Brown’s 2024 full-year earnings is pegged at $3.29 per share, which indicates 17.1% year-over-year growth. The estimate jumped by 9 cents over the past month. BRO beat earnings estimates in each of the past four quarters, with an average surprise of 11.2%.