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Aon (AON) to Post Q1 Earnings: What's in Store for the Stock?

Aon plc AON is set to report first-quarter 2020 results on May 1, before the opening bell.

Q1 Earnings & Revenue Expectations    

The Zacks Consensus Estimate for Aon’s first-quarter earnings of $3.70 per share implies an 11.8% increase from the prior-year reported number.

Likewise, the consensus estimate for sales of $3.32 billion suggests a 5.7% improvement from the year-ago reported figure.

Factors Likely to Impact Q1 Results

The company’s bottom line is likely to have improved on the back of its solid revenue momentum.

Aon is expected to have seen an uptick across most of its segments, namely Commercial Risk Solutions, Data & Analytics, Health Solutions and Reinsurance Solutions segments, leading to revenue strength.

Per its last earnings call, the company expected an unfavourable impact of 5 cents per share on the first-quarter operating income (assuming currency rates to remain stable) due to stronger U.S. dollar compared to the euro.

The Commercial Risks Solutions segment is likely to have benefited from sturdy organic revenue growth across major geographies.

The Zacks Consensus Estimate for first-quarter revenues from the company’s Commercial Risk Solutions of $1.2 billion indicates 5.7% growth from the year-earlier reported numbers.

The Data & Analytics segment is also likely to have continued delivering solid performances in the first quarter. The consensus mark for revenues from this segment stands at $355 million, indicating 5.7% growth from the year-ago reported figure.

The Reinsurance Solutions segment is expected to have grown in the first quarter, primarily driven by new business generation.

Notably, the consensus mark for revenues from Health Solutions and Reinsurance Solutions suggests a respective rise of 4.9% and 5.5% from the year-earlier reported numbers.

Notably, the company’s Health Solutions segment might have made a progress owing to organic growth in the period under review.

However, the consensus estimate for revenues of $419 million from the Retirement Solutions segment hints at a 0.2% dip from the year-ago reported figure.

Despite an adverse forex fluctuation, the company is likely to have gained from a favorable operational margin.

Aon is also likely to have enjoyed free cash flow in the to-be-reported quarter, mainly aided by its operational excellence.

However, the company might have incurred high costs in the quarter to be reported, induced by heavy investments.

What the Quantitative Model States

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 odds of a positive surprise, which is not the case here. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Earnings ESP: Aon has an Earnings ESP of -1.35%. This is because the Most Accurate Estimate is pegged at $3.65, lower than the Zacks Consensus Estimate of $3.70. 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-eps-surprise | Aon plc Quote

Zacks Rank: Aon currently carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s negative ESP in the combination makes surprise prediction difficult.

Highlights of Q4 Earnings and Surprise History

Aon’s fourth-quarter 2019 operating earnings of $2.53 per share beat the Zacks Consensus Estimate by 1.6%, primarily riding on higher revenues and strong segmental contributions. Moreover, the metric increased 17.1% year over year.

The insurance broker flaunts an impressive earnings history, having delivered a positive surprise in three of the trailing four quarters missing the mark in one, the average being 0.62%.

Stocks to Consider

Here are a few stocks worth considering with the perfect mix of elements to beat on earnings in the respective upcoming releases:

Marsh & McLennan Companies, Inc. MMC is slated to report first-quarter earnings on Apr 30. It has a Zacks Rank of 3 and an Earnings ESP of +0.59%.

Assurant, Inc. AIZ is set to report first-quarter earnings on May 5. The company is Zacks #3 Ranked and has an Earnings ESP of +4.28%.

Kemper Corporation KMPR is slated to announce first-quarter earnings on May 4. The stock has an Earnings ESP of +12.57% and is a #2 Ranked player.

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