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Aon (AON) Gears Up to Report Q2 Earnings: What's in Store?

Aon plc AON is slated to report second-quarter 2020 results on Jul 31, before the opening bell.

Q2 Estimates   

The Zacks Consensus Estimate for Aon’s second-quarter earnings is pegged at $1.92 per share, indicating an improvement of 2.7% from the prior-year quarter.

However, the consensus mark for revenues stands at $2.54 billion, suggesting a decline of 2.6% from the year-ago reported figure.

Factors to Note

Weak performance among its segments — Commercial Risk Solutions, Data & Analytic Services, Health Solutions and Retirement Solutions — is likely to get reflected in the second-quarter results. Soft segmental revenues might have dented the company’s top-line growth in the to-be-reported quarter.

The Zacks Consensus Estimate for the Commercial Risk Solutions segment’s second-quarter revenues is pegged at $1.1 billion, suggesting a decline of 2.7% fall from the prior-year quarter.

The Data & Analytics Services segment might have witnessed strain on the more discretionary parts of its business on account of the pandemic. The consensus mark for the segment’s revenues stands at $283 million, indicating a decline of 1% from the year-ago reported figure. Meanwhile, the Zacks Consensus Estimate for the Health Solutions segment’s second-quarter revenues is pegged at $310 million, suggesting a decrease of 2.2% from the year-ago reported figure.

Also, decline in core retirement, which is likely to have resulted from reduced billable hours and discretionary project-related work owing to the pandemic, may have impacted the Retirement Solutions segment. The Zacks Consensus Estimate for the segment’s revenues stands at $399 million, suggesting a decline of 4.8% from the year-ago reported figure.

However, the Reinsurance Solutions segment is likely to have witnessed growth in the to-be-reported quarter. The segment might have benefited from new business generation. The consensus estimate for the Reinsurance Solutions segment’s second-quarter revenues stands at $432 million, indicating an improvement of 2.9% from the year-ago reported figure.

Per its last earnings call, the company expected an unfavourable impact of 3 cents per share on second-quarter operating income (assuming currency rates to remain stable). Despite adverse forex fluctuation, the company is likely to have gained from a favorable operational margin, which in turn is likely to have generated free cash flows for Aon.

Finally, the company might have incurred lower costs in the to-be-reported quarter, primarily due to lower restructuring charges and the preemptive reduction and deferral of certain discretionary expenses related to COVID-19.

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise

Aon plc price-eps-surprise | Aon plc Quote

What Our Quantitative Model Predicts

Our proven model does not conclusively predict an earnings beat for Aon this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Aon has an Earnings ESP of -1.76%. This is because the Most Accurate Estimate of $1.89 is pegged lower than the Zacks Consensus Estimate of $1.92. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Aon carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Highlights of Q1 Earnings and Surprise History

Aon’s first-quarter 2020 operating earnings of $3.68 per share missed the Zacks Consensus Estimate by 0.5%. However, the metric improved 11.2% year over year on the back of higher revenues and strong segmental contributions. Total revenues in the first quarter increased 2.4% to $3.2 billion including 5% organic revenue growth.

The company has beat estimates in two of the trailing four quarters, while missing the same twice. It has a trailing four-quarter earnings surprise of 0.49%, on average.

Stocks to Consider

Some stocks worth considering from the insurance space with a perfect mix of elements to surpass estimates in the upcoming quarterly releases are as follows:

Marsh & McLennan Companies, Inc. MMC has an Earnings ESP of +3.95% and a Zacks Rank #3. The company is scheduled to release second-quarter 2020 earnings on Jul 30.

Prudential Financial, Inc. PRU has an Earnings ESP of +0.73% and a Zacks Rank of 3, at present. The company is scheduled to release second-quarter 2020 earnings on Aug 4.

MetLife, Inc. MET has an Earnings ESP of +2.51% and a Zacks Rank #3. The company is scheduled to release second-quarter 2020 earnings on Aug 5.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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