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AON Stock Rises 17.3% in 3 Months: Is it Time to Buy or Let it Fly?
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Leading insurer Aon plc (AON - Free Report) continues to expand its analytics capabilities and gain from strong retention and new business generation. The company has seen its shares rise 17.3% in the past three months, outpacing the industry’s 15.2% growth. The company also outperformed the S&P 500’s return of 2.4% during this period. Currently trading at $349.20, AON remains just below its 52-week high of $353.54.
Given the impressive performance, can investors still consider buying AON stock, or should you book profits?
AON’s Three-Month Price Performance
Image Source: Zacks Investment Research
The stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum. This proximity to its 52-week high underscores investor confidence and market optimism about this insurance brokerage company’s prospects.
Reasons to Like AON
Improving product offerings and expanding its product portfolio helps the company retainits client base and generate new businesses. For example, its recent launch of the newly integrated Radford McLagan Compensation Database will expand the analytics capabilities for its existing Human Capital clients. We expect more such moves to come in the future. This helps in organic revenue growth.
Prudent acquisitions and partnerships form one of the main growth strategies at the company and it has sealed many buyouts over the past few years to scale its business and expand product offerings. The company closed the NFP acquisition, a privately held middle-market property and casualty broker, in April 2024. It is expected to boost AON’s top line, driven primarily by incremental M&A.
The company continues to streamline operations, getting rid of less profitable assets and focusing more on improving efficiencies. Its Aon United restructuring program will support its margin expansionary targets in the long run. However, in the short run, charges from the program might tame profit growth a bit.
Its cash-generating abilities help in making shareholder-friendly moves. In 2023, the company bought back shares worth $800 million. It repurchased shares worth $500 million in the first half of 2024. It had around $2.8 billion of authorization left under its share repurchase program as of June 30, 2024. Its solid double-digit free cash flow growth outlook in the long term will allow management the financial flexibility to continue returning wealth to shareholders.
AON’s Favorable Valuation
From a valuation perspective, AON appears relatively cheap. The company is trading at a forward 12-month price-to-earnings multiple of 20.80X, lower than the industry average of 22.39X.
Image Source: Zacks Investment Research
Estimates for AON
The Zacks Consensus Estimate for 2024 adjusted earnings for AON is currently pegged at $15.23 per share, indicating 7.7% year-over-year growth. The consensus mark for next year suggests a further 14.4% jump. The consensus estimate for 2024 and 2025 revenues signals 17.5% and 11.5% year-over-year growth, respectively.
Key Concerns for AON
There are a few factors that investors should keep an eye on.
The company’s long-term debt is 74.6% of total capital, significantly higher than the industry’s average of 48.4%. AON exited the second quarter with cash and cash equivalents of $974 million, significantly lower than long-term debt of $17.6 billion.
Its trailing 12-month return on invested capital (ROIC) stands at 8.2%, lagging behind the industry average of 9.7%. This indicates that the company is less efficient at generating returns from its invested capital compared to its peers, signaling weaker capital utilization.
Final Verdict: Hold AON Stock Now
While AON has strong long-term potential with a growing focus on expanding its product portfolio and scaling its business, the specific challenges facing the company cannot be ignored. AON remains one of the best-positioned professional services firms with a favorable valuation to achieve margin expansion.
Overall, the outlook is largely neutral for AON shares. It currently carries a Zacks Rank #3 (Hold).
Better-Ranked Players
Investors interested in the broader Finance space may look at some better-ranked players like MGIC Investment Corporation (MTG - Free Report) , Jackson Financial Inc. (JXN - Free Report) and Brown & Brown, Inc. (BRO - Free Report) . While MGIC Investment currently sports a Zacks Rank #1 (Strong Buy), Jackson Financial and Brown & Brown carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGIC Investment’s current-year earnings suggests a 9.1% year-over-year increase. During the past month, MTG has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $1.2 billion, indicating a 4.7% increase from a year ago.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 60 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for Brown & Brown’s 2024 earnings indicates 31% year-over-year growth. During the past 60 days, BRO has witnessed six upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.8%.
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AON Stock Rises 17.3% in 3 Months: Is it Time to Buy or Let it Fly?
Leading insurer Aon plc (AON - Free Report) continues to expand its analytics capabilities and gain from strong retention and new business generation. The company has seen its shares rise 17.3% in the past three months, outpacing the industry’s 15.2% growth. The company also outperformed the S&P 500’s return of 2.4% during this period. Currently trading at $349.20, AON remains just below its 52-week high of $353.54.
Given the impressive performance, can investors still consider buying AON stock, or should you book profits?
AON’s Three-Month Price Performance
The stock is trading above its 50-day and 200-day moving averages, indicating solid upward momentum. This proximity to its 52-week high underscores investor confidence and market optimism about this insurance brokerage company’s prospects.
Reasons to Like AON
Improving product offerings and expanding its product portfolio helps the company retainits client base and generate new businesses. For example, its recent launch of the newly integrated Radford McLagan Compensation Database will expand the analytics capabilities for its existing Human Capital clients. We expect more such moves to come in the future. This helps in organic revenue growth.
Prudent acquisitions and partnerships form one of the main growth strategies at the company and it has sealed many buyouts over the past few years to scale its business and expand product offerings. The company closed the NFP acquisition, a privately held middle-market property and casualty broker, in April 2024. It is expected to boost AON’s top line, driven primarily by incremental M&A.
The company continues to streamline operations, getting rid of less profitable assets and focusing more on improving efficiencies. Its Aon United restructuring program will support its margin expansionary targets in the long run. However, in the short run, charges from the program might tame profit growth a bit.
Its cash-generating abilities help in making shareholder-friendly moves. In 2023, the company bought back shares worth $800 million. It repurchased shares worth $500 million in the first half of 2024. It had around $2.8 billion of authorization left under its share repurchase program as of June 30, 2024. Its solid double-digit free cash flow growth outlook in the long term will allow management the financial flexibility to continue returning wealth to shareholders.
AON’s Favorable Valuation
From a valuation perspective, AON appears relatively cheap. The company is trading at a forward 12-month price-to-earnings multiple of 20.80X, lower than the industry average of 22.39X.
Estimates for AON
The Zacks Consensus Estimate for 2024 adjusted earnings for AON is currently pegged at $15.23 per share, indicating 7.7% year-over-year growth. The consensus mark for next year suggests a further 14.4% jump. The consensus estimate for 2024 and 2025 revenues signals 17.5% and 11.5% year-over-year growth, respectively.
Key Concerns for AON
There are a few factors that investors should keep an eye on.
The company’s long-term debt is 74.6% of total capital, significantly higher than the industry’s average of 48.4%. AON exited the second quarter with cash and cash equivalents of $974 million, significantly lower than long-term debt of $17.6 billion.
Its trailing 12-month return on invested capital (ROIC) stands at 8.2%, lagging behind the industry average of 9.7%. This indicates that the company is less efficient at generating returns from its invested capital compared to its peers, signaling weaker capital utilization.
Final Verdict: Hold AON Stock Now
While AON has strong long-term potential with a growing focus on expanding its product portfolio and scaling its business, the specific challenges facing the company cannot be ignored. AON remains one of the best-positioned professional services firms with a favorable valuation to achieve margin expansion.
Overall, the outlook is largely neutral for AON shares. It currently carries a Zacks Rank #3 (Hold).
Better-Ranked Players
Investors interested in the broader Finance space may look at some better-ranked players like MGIC Investment Corporation (MTG - Free Report) , Jackson Financial Inc. (JXN - Free Report) and Brown & Brown, Inc. (BRO - Free Report) . While MGIC Investment currently sports a Zacks Rank #1 (Strong Buy), Jackson Financial and Brown & Brown carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for MGIC Investment’s current-year earnings suggests a 9.1% year-over-year increase. During the past month, MTG has witnessed one upward estimate revision against none in the opposite direction. The consensus mark for current-year revenues is pegged at $1.2 billion, indicating a 4.7% increase from a year ago.
The Zacks Consensus Estimate for Jackson Financial’s current-year earnings is pegged at $18.49 per share, which indicates 44% year-over-year growth. It witnessed two upward estimate revisions in the past 60 days against no downward movement. The consensus mark for JXN’s current year revenues suggests a 116.7% surge from a year ago.
The Zacks Consensus Estimate for Brown & Brown’s 2024 earnings indicates 31% year-over-year growth. During the past 60 days, BRO has witnessed six upward estimate revisions against none in the opposite direction. It beat earnings estimates in each of the past four quarters, with an average surprise of 9.8%.