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Aon Hits 52-Week High on Strong Q3, Recent Acquisitions


On Nov 29, 2016, shares of Aon plc AON hit a 52-week high of $113.99. The upside is believed to have been driven by recent acquisition deals and a profitable third quarter reported last month.

Notably, over the past 52 weeks the stock has gained 19%, compared with a rise of just 6% for the S&P 500 index and price appreciation of 21.4% for the Zacks categorized Insurance-Brokers Industry

Investors favorably viewed the company’s third-quarter results, wherein earnings of $1.29 per share surpassed the Zacks Consensus Estimate of $1.28 and increased 4% year over year. The outperformance was driven by solid revenue growth across both Risk and HR Solutions.

AON PLC Price and Consensus

AON PLC Price and Consensus | AON PLC Quote

The quality of earnings was strong as evident by solid organic revenue growth across both Risk Solutions and HR Solutions and double-digit growth in free cash flow for the first nine months of 2016. Also, the Reinsurance business was able to generate organic revenue growth of 1% compared with a revenue loss of 4% in the prior-year quarter. It marked the fourth consecutive quarter of positive growth in Reinsurance, further validating the company’s previous guidance of an expected return to modest growth in 2016.

A positive comment by management also raised investors’ hopes. Management stated that it expects a strong finish to the year, as the company heads into its seasonally strongest quarter with continued long-term growth driven by huge investments in advisory and analytic capabilities across its portfolio. The company also disclosed that it is on track for double-digit growth in free cash flow in 2016 and will generate $2.4 billion in free cash flow in 2017.

Investors view favorably the efforts made by the company to expand its content and global footprint through tuck-in acquisitions that increase scale in emerging markets and expand capability. Notably, last month, the company announced the addition of Stroz Friedberg, a global leader in cyber security, bringing together two of the world's most highly skilled teams focused on cyber risk mitigation. This investment bolsters Aon's leading position in cyber risk brokerage and creates a comprehensive cyber advisory group, allowing its clients to have access to highly advanced solutions in the industry.

This week, the company announced an agreement to acquire Admix, a leading health and benefits brokerage and solutions firm in Brazil. The buyout will double Aon’s presence in the region and enable it to reap growth opportunities from its steadily growing private health insurance market.

Aon carries a Zacks Rank # 3 (Hold).

Some better-ranked players in the space are Alleghany Corp. Y , Arch Capital Group Ltd. ACGL and First American Financial Corp. FAF. Each of these stocks carries a Zacks Rank #1 (Strong Buy).You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany delivered positive surprises in three of the last four quarters, with an average beat of 20.52%.

Arch Capital beat expectations in each of the last four quarters, with an average beat of 9.27%.

First American Financial Corporation delivered positive surprises in each of the last four quarters, with an average beat of 62.8%.

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