Aon plc (AON) is a British multinational corporation that offers risk management services, insurance and reinsurance brokerage, human resource consulting and outsourcing services globally. With operations in more than 120 countries, the company utilizes its resources to develop individual as well as group insurance programs. It offers its services globally across personal lines, mid-market companies and multinational companies.
Inorganic growth strategies and cost containment measures form the foundation for Aon’s operational strength. This is reflected by the expansion of the underwriting tie-up with AXIS Insurance, a business segment of AXIS Capital Holdings Limited in May 2015. AXIS Insurance, as the new insurance carrier partner for the A&E Advantage program, should help Aon attract more clients and hence, expand its client base.
Moreover free cash flow generation helps the company to implement efficient capital management strategies that boost shareholder confidence on the stock.
However, the company is exposed to catastrophes which affect its financials adversely. Moreover, increased debt levels, competitive threats, and pressures from lawsuits raise caution.
The negatives have been driving bearish sentiments as evident from consensus estimate being southbound. However, Aon has a decent history when it comes to earnings as the stock has beaten estimates in the last four quarters, making for an average surprise of 6.98%.
Currently, Aon has a Zacks Rank #4 (Sell), but that could definitely change following its earnings report which was just released. We have highlighted some of the key stats from this just-revealed announcement below:
Earnings: Aon beats our earnings estimate by a penny. Our consensus called for EPS of $1.30, and the company reported EPS of $1.31.
Revenue: Revenues slightly missed our estimate. Our consensus called for revenues of $3 billion, and the company reported revenues of $2.8 billion.
Key Stats to Note: Operating expenses increased year over year in the quarter due to legacy litigation costs for events that took place more than ten years ago, high costs to assist organic revenue growth, and higher acquisition expenses. Moreover, foreign currency exchange rates had an unfavorable impact of 8 cents on the adjusted net income from continuing operations during the quarter.
Cash flow increased during the first six months and more than offset the rise in capital expenditures leading to a 2% surge in free cash flow.
Check back later for our full write up on this AON earnings report later!
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