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Aon's (AON) to Report Q2 Earnings: Is a Beat in the Cards?

Zacks Equity Research
Updated

Aon plc AON is set to report second-quarter 2018 results on Jul 26, before the market opens. Last reported quarter, the insurance broker's earnings surpassed the Zacks Consensus Estimate, rising 6.45% year over year.

The company boasts a stellar surprise history, having surpassed estimates in all the last four quarters with an average beat of 2.11%.

Factors to be Considered for To-Be-Reported Quarter

Aon is likely to perform well in the yet-to-be-reported quarter on the back of strategic investments, greater innovation and an improved portfolio mix. The company has likely witnessed an increased operating leverage as well as a free cash flow.

Also, savings from investments in its core operational improvement should have aided margins and the operating income in the second quarter.

The company is expected to continue with its solid organic revenue momentum, which has been constantly growing over the last few years, mainly backed by the Reinsurance and Commercial Risk Solutions segments.

The Reinsurance Solutions’ organic revenue growth is likely to increase as well, consistent with its trend for the last few years.

The company has likely witnessed steady growth across most geographies, especially from the new business including strong sales across Canada, Latin America and the U.S. Retail plus a solid management of the renewable portfolio.

It has constantly invested in technological upgrades, data and analytics, which are likely to uplift its performance in the quarter to be reported.

Aon has likely enhanced its shareholder value by effective capital deployment through the second quarter.

However, rising operating expenses might continue to weigh on the margins.

What the Quantitative Model States

Per our proven model, Aon is likely to beat on earnings in the impending quarterly results. This is because the stock has the right combination of a Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen.

Earnings ESP: Aon has an Earnings ESP of +0.23%. This is because the Most Accurate Estimate is pegged at $1.64, higher than the Zacks Consensus Estimate of $1.63. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise | Aon plc Quote

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Zacks Rank: Aon carries a Zacks Rank #3, which increases the predictive power of ESP. Together with a positive ESP, which indicates a likely earnings surprise, the stock has significantly higher chances of beating estimates this reporting cycle.

Conversely, the Sell-rated stocks (#4 or 5) should never be considered going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Other Stocks to Consider

Some other stocks worth considering from the insurance brokerage industry with the right combination of elements to also surpass estimates this time around are as follows:

Arthur J. Gallagher & Co. AJG is set to report second-quarter earnings on Jul 26 and has an Earnings ESP of +0.63%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marsh & McLennan Companies, Inc. MMC has an Earnings ESP of +0.76% and a Zacks Rank of 3. The company is set to announce second-quarter earnings on Jul 26.

Willis Towers Watson Public Limited Company WLTW has an Earnings ESP of +0.53% and is a #3 Ranked stock. The company is set to announce second-quarter earnings on Aug 2.

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