On May 22, 2014,
) achieved a new 52-week high of $88.25. The rally was driven by
the strong first quarter 2014 earnings and capital deployment
Aon's solid first-quarter 2014 results comprised a 9.40% positive
earnings surprise. Earnings also increased 15% year over year
driven by strong operating performance by the Risk Solutions
business and efficient capital management. Notably, this risk
management and insurance provider has delivered positive earnings
surprises in all of the last four quarters with an average beat of
Following Aon's earnings release on April 25, 2014, its share price
rose 3.9%. The one-year return of the stock was 32.78%, much above
the S&P 500's return of 13.49%.
During the first quarter, Aon's top line increased 1% year over
year on the back of higher organic revenues. To strengthen its
business, Aon allied with a financial guidance software company,
HelloWallet, to help employers assist the financial security of
On expectations that 76% of the U.S. companies would expand
wellness benefits beyond retirement in 2014, we believe that this
alliance will help Aon gain more clients and pave the way for more
Moreover, Aon's affinity business, Healthcare Providers Service
Organization (HPSO), in association with
CNA Financial Corp.
) has analyzed and released a risk study for counselors in Mar
2014. We expect this endeavor to help Aon improve counselors' risk
management and thereby, gain more clients in this arena.
Aon's capital deployment initiatives have been impressive. The
company deployed $600 million toward share repurchases in the first
quarter and hiked its annual dividend by 43% in Apr 2014. Share
repurchases and an increase in dividend are expected to help the
company retain investor confidence on the stock going forward.
The capital deployments and growth initiatives keeps us optimistic
about the stock's performance. The full-year 2014 Zacks Consensus
Estimate increased 4.6% to $5.43 since the company reported its
first-quarter results, as most of the estimates moved north.
During the same period, the estimates also pulled up the Zacks
Consensus Estimate for full-year 2015 by 3.3% to $5.99 per share.
The estimates translate to a year-over-year improvement of 11.2%
and 10.2% for 2014 and 2015, respectively.
Aon currently caries a Zacks Rank #2 (Buy). Other players in the
same sector, which look attractive at current levels, include
Blue Capital Reinsurance Holdings Ltd.
Erie Indemnity Co.
). Both these stocks have the same Zacks Rank as Aon.
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