On May 30, 2013, shares of Aon plc (AON) reached a 52-week high of $67.26. The company posted positive earnings surprise in three out of last four quarters with an average beat of 2.33%.
On Apr 26, 2013, Aon reported its first-quarter 2013 adjusted operating earnings of $1.11 in line with the Zacks Consensus Estimate and was ahead of the year-ago earnings by 13%.
During the quarter, Aon’s top line grew approximately 3% year over year to $2.9 billion, although a tad lower than the Zacks Consensus Estimate of $2.94 billion. Results were driven by higher organic revenue, and commission and fees resulting from acquisitions net of divestitures, partially mitigated by lower investment income.
Aon is expanding its business through partnerships and strategic liaisons. Aon’s partnership with BOLT Solutions Inc. (“Bolt”), announced on Apr 8, 2013, (“Bolt”) is expected to enhance its services and strengthen the customer base. We also view favorably the partnership extension with Manchester United Plc (MANU) announced the same day. The new deal will be effective from Jul 1, 2013 and extend the liaison till 2021.
Moreover Aon has continuously tried to enhance shareholders’ worth through dividend payouts and share repurchases. In the first quarter of 2013, the company deployed $300 billion to repurchase 5 million Class A Ordinary shares and another $50 million to pay dividends.
Additionally, the board approved an 11% hike in its annual dividend on Class A Ordinary shares to 70 cents from 63 cents paid earlier. This further reflects the company’s strong liquidity position. Moreover, its consistent cash flow and prudent cash balances continue to create strong liquidity.
Significant share repurchases are expected to bolster earnings of Aon going forward. The Zacks Consensus Estimate for 2013 is pegged at $4.72, up 12.03% year over year. The Zacks Consensus Estimate for 2014 is $5.30, up 12.28% year over year. The overall long-term expected earnings growth rate for this stock is 10.0%.
Valuation looks attractive for Aon. The shares are trading at a 9.8% discount to the peer group average, on a forward price-to-earnings basis. Return on equity remains 43.5% above the peer group average of 12.4%. The 1-year return from the stock is 35.35%, higher than the S&P 500’s return of 27.73%.
Aon currently carries a Zacks Rank #3 (Hold). Other stocks in this industry such as Validus Holdings Ltd. (VR) carries a favorable Zacks rank #1 (Strong Buy) while Everest Re Limited (RE) carries a Zacks Rank #2 (Buy) and appear impressive.
To read this article on Zacks.com click here.
Get all Zacks Research Reports and be alerted to fast-breaking buy and sell opportunities every trading day.
Be the first to comment