Estimates for Aon plc (AON - Free Report) have been revised upward over the past 30 days, reflecting analysts' optimism on the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings move 0.4% and 0.1% north, respectively, over the same time frame.
Shares of this Zacks Rank #3 (Hold) company have rallied 16.8% against its industry’s decline of 8%.
Now, let’s focus on some important factors that make the company an investor favorite.
Robust Results: In the first nine months of 2018, Aon witnessed a sturdy bottom-line improvement, continuing with the trend of the past many years. Although revenues slipped slightly in 2017, it again soared 114.2% year over year in the first three quarters of this year. This upside was mainly driven by solid fundamentals such as the company’s expansions through strategic acquisitions and partnerships plus divestitures along with a strong financial position. The company's bottom line is expected to grow consistently on the back of its core fundamentals.
Stellar Earnings Surprise History: The company boasts an impressive earnings surprise history, having trumped the Zacks Consensus Estimate in each of the trailing five reported quarters, the average being 1.93%. This also vouches for the company’s operational excellence.
Solid Organic Growth Drivers: The company’s segments, namely Commercial Risk Solution, Reinsurance Solutions, Retirement Solutions, Health Solutions plus Data and Analytic Services have been robust organic revenue drivers. This was driven by a sturdy new business generation and retention across its core portfolio along with double-digit growth in certain areas of investments.
Strategic Initiatives: Aon is known to grow on the back of fruitful strategies such as acquisitions and partnerships. Over the past three years, it has successfully closed various purchases aimed at expanding its health and benefits business, flood insurance solutions and risk and insurance solutions operations. In 2017 and during the first nine months of 2018, the company completed a total of 22 integrations. Moreover, it has been selling out its non-core operations to streamline its business since 2010. The divestitures have definitely helped it concentrate on its core businesses, thereby generating higher return on equity. These transactions and alliances are likely to accelerate long-term growth for Aon.
Firm Capital Position: Aon has been witnessing a very sound capital position for quite some time now. Its free cash flow over the past few years (except 2017) looks commendable. Rising cash flow from operating activities and capital expenditures helped the company deploy capital consistently. It has been raising its dividend for the past many years. Its consistent share buyback also aided its bottom line. The company’s strong balance sheet, assisting in efficient capital management, should attract investors’ attention.
Growth Projections: The Zacks Consensus Estimate for current-year earnings per share is pegged at $8.13, representing a year-over-year increase of 24.69% on 8.36% higher revenues of $10.8 billion.
For 2019, the Zacks Consensus Estimate for earnings per share stands at $9.20 on $11.42 billion revenues, translating into a respective 13.13% and 5.42% year-over-year rise.
Further, the company’s estimated long-term (five years) EPS growth rate of 11.8%, which is greater than the industry’s earnings growth rate of 11.6%, promises rewards for investors.
Stocks to Consider
Investors looking for some better-ranked stocks from the insurance industry may take a look at eHealth, Inc. (EHTH - Free Report) , Old Republic International Corporation (ORI - Free Report) and MetLife, Inc. (MET - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
eHealth offers private online health insurance exchange services in the United States and China. It came up with average three-quarter beat of 7.29%.
Old Republic engages in the insurance underwriting and related services business, primarily in the United States and Canada. The company managed to deliver average trailing four-quarter positive surprise of 15.66%.
MetLife provides solutions in insurance, annuities, employee benefits and asset management businesses. It pulled off average four-quarter earnings surprise of 9.67%.
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