Aon plc (AON): What's in the Cards This Earnings Season?

Aon plcAON is set to report fourth-quarter 2016 results on Feb 10, before the market opens. Last quarter, the company posted a positive earnings surprise of 78%. Let's see how things are shaping up for this announcement.

Factors to be Considered This Quarter

Strong growth in the U.S. retail on the back of new business generation and retention is likely to have boosted Aon's top line in the fourth quarter.

Strategic investments in innovative technology, data and analytics are likely to have bolstered the underlying performance of the company's risk-solution segment in the to-be-reported quarter.

Continued business generation in Aon's client treaty and increase in facultative placements are also likely to have facilitated Aon's reinsurance business growth in the quarter.

The HR solution segment is expected to have performed well in the quarter on the back of Aon Hewitt's leadership and in-depth understanding of the market.

Continuous investments to improvise health solutions covering the full range of benefit strategies, client size, funding choices and Aon's private health care exchanges also bode well.

Aon's share repurchase in the second half of the year is likely to have boosted its margin by limiting the share count.

Though the interest rate improved in Dec 2016, the effect of this increase will be muted in the fourth quarter. prolonged period of low interest rates is likely to have limited the growth in net investment income for the fourth quarter.

In addition, unfavorable market conditions in various countries across Europe and Asia are likely have put pricing pressure in the Pacific region.

Although Aon has displayed impressive cost control in recent past, certain expenses associated with its non-core businesses might have limited bottom-line growth in the fourth quarter.

Aon's dependence on debt financing is expected to have resulted in higher interest expenses and is likely to adversely impact margins.

Aon PLC Price and EPS Surprise

Aon PLC Price and EPS Surprise | Aon PLC Quote

Earnings Whispers

Our proven model does not conclusively show that Aon is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Aon has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at $2.49. 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. Though a favorable Zacks Rank increases the predictive power of ESP, we need a positive Earnings ESP to be confident about an earnings beat.

Conversely, we caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some other companies from the finance sector that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Argo Group National Holdings Ltd. AGII , which is expected to report fourth-quarter earnings on Feb 13, has an Earnings ESP of +9.52% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

American International Group, Inc. AIG has an Earnings ESP of +2.46% and a Zacks Rank #3. The company is set to report fourth-quarter earnings also on Feb 14.

Ares Capital Corp. ARCC has an Earnings ESP of +2.63% and a Zacks Rank #3. The company is set to report fourth-quarter earnings on Feb 22.

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Ares Capital Corporation (ARCC): Free Stock Analysis Report

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Argo Group International Holdings, Ltd. (AGII): Free Stock Analysis Report

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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.

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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