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.
Here's Why You Should Stay Away from Aon (AON) Right Now
Read MoreHide Full Article
Aon plc (AON - Free Report) has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $9.72 per share has moved 0.2% south over the past seven days, indicative of analysts’ bearish sentiment on the stock.
So, what could be the reason for this pessimistic stance?
In the recently reported quarter, the company’s earnings failed to meet estimates. Notably, the company’s first-quarter 2020 operating earnings of $3.68 per share missed the Zacks Consensus Estimate by 0.5%.
Moreover, Aon deferred its share buyback plan and halted M&A activities due to the COVID 19-led uncertainty. Due to this suspension, the company’s bottom line will be bereft of the cushion that share repurchase programs provide, which may bother investors.
Moreover, its high debt is a concern. Long-term debt has been continuously increasing since 2014 due to an increase in commercial paper outstanding. Interest expenses have been persistently rising since 2014 (except in 2018). Its total debt is 71.3% (comparing with 212.8% as of Mar 31, 2020) of total capital, higher than the industry’s average of 55.1%. As of Mar 31, 2020, it had cash and cash equivalents of $690 million, lower than its long-term debt of $6.2 billion. Although the company will have to pay not more than $750 million of term debt in the upcoming year, we are concerned about its solvency level.
Aon as a global corporation is exposed to foreign currency fluctuations and has been facing an unfavorable impact of forex volatility on its earnings per share since 2012. In the first quarter of 2020, forex had an adverse impact of 3 cents per share.
Moreover, management anticipates a further negative impact of 3 cents per share in the second quarter, 4 cents in the third and 6 cents in the fourth quarter.
Aon’s business operations in more than 100 countries make its financial results sensitive to foreign exchange rate fluctuations, which might distort true period-to-period comparisons of changes in revenues or pretax income.
Zacks Rank and Price Performance
Shares of this currently Zacks Rank #4 (Sell) company have lost 9.2% year to date, wider than the industry’s decline of 6.6%.
Other companies in the same space like eHealth Inc. (EHTH - Free Report) , Arthur J Gallagher Co. (AJG - Free Report) and Brown & Brown Inc. (BRO - Free Report) have gained 11.6%, 2.5% and 5.4%, respectively, in the same time frame.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Bigstock
Here's Why You Should Stay Away from Aon (AON) Right Now
Aon plc (AON - Free Report) has been witnessing downward earnings estimate revisions of late. The Zacks Consensus Estimate for current-year bottom line of $9.72 per share has moved 0.2% south over the past seven days, indicative of analysts’ bearish sentiment on the stock.
So, what could be the reason for this pessimistic stance?
In the recently reported quarter, the company’s earnings failed to meet estimates. Notably, the company’s first-quarter 2020 operating earnings of $3.68 per share missed the Zacks Consensus Estimate by 0.5%.
Moreover, Aon deferred its share buyback plan and halted M&A activities due to the COVID 19-led uncertainty. Due to this suspension, the company’s bottom line will be bereft of the cushion that share repurchase programs provide, which may bother investors.
Moreover, its high debt is a concern. Long-term debt has been continuously increasing since 2014 due to an increase in commercial paper outstanding. Interest expenses have been persistently rising since 2014 (except in 2018). Its total debt is 71.3% (comparing with 212.8% as of Mar 31, 2020) of total capital, higher than the industry’s average of 55.1%. As of Mar 31, 2020, it had cash and cash equivalents of $690 million, lower than its long-term debt of $6.2 billion. Although the company will have to pay not more than $750 million of term debt in the upcoming year, we are concerned about its solvency level.
Aon as a global corporation is exposed to foreign currency fluctuations and has been facing an unfavorable impact of forex volatility on its earnings per share since 2012. In the first quarter of 2020, forex had an adverse impact of 3 cents per share.
Moreover, management anticipates a further negative impact of 3 cents per share in the second quarter, 4 cents in the third and 6 cents in the fourth quarter.
Aon’s business operations in more than 100 countries make its financial results sensitive to foreign exchange rate fluctuations, which might distort true period-to-period comparisons of changes in revenues or pretax income.
Zacks Rank and Price Performance
Shares of this currently Zacks Rank #4 (Sell) company have lost 9.2% year to date, wider than the industry’s decline of 6.6%.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other companies in the same space like eHealth Inc. (EHTH - Free Report) , Arthur J Gallagher Co. (AJG - Free Report) and Brown & Brown Inc. (BRO - Free Report) have gained 11.6%, 2.5% and 5.4%, respectively, in the same time frame.
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>