Is Aon plc (AON) Poised To Beat Q4 Earnings Estimates? - Analyst Blog

We expect insurance broker Aon plc ( AON ) to beat expectations when it reports fourth-quarter 2014 earnings on Feb 6, 2015.

Why a Likely Positive Surprise?

Our proven model shows that Aon is likely to beat earnings because it has the right combination of two key components.

Zacks ESP:Earnings ESP , which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is +1.08%. This is very meaningful and a leading indicator of a likely positive earnings surprise for shares.

Zacks Rank: Aon carries a Zacks Rank #3 (Hold). Note that stocks with a Zacks Ranks #1, 2 and 3 have a significantly higher chance of beating earnings. The Sell-rated stocks (#4 and 5) should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

The combination of Aon's Zacks Rank #3 and +1.08% ESP makes us confident of an earnings beat this season.

What is Driving the Better-Than-Expected Earnings?

In the quarter under review, Aon had undertaken a number of initiatives which should drive its earnings. The roll out of the Construction Risk Portal, one accidental death and disability (AD&D) coverage for firefighters, an Ebola response product and Implemented Annuities service deserve particular mention in this regard. While the first three were aimed at enhancing the company's operations in the respective fields, the fourth was targeted at simplifying and streamlining the process of bulk annuity transactions by assigning its key elements to Aon Hewitt, a subsidiary of Aon.

We expect these initiatives to strengthen the company's existing operations and lead to higher revenues. Moreover, Aon acquired Safe Brokers to boost its investment in the Greek and Cypriot markets. This move is in line with the company's global network strengthening strategy and should contribute positively to earnings this quarter. Additionally, Aon increased its share repurchase authorization during the quarter. Notably, an increased share count is likely to boost earnings per share.

The positive trend is evident in the trailing four-quarter average surprise of 7.35%, which was largely driven by the 15.18% positive surprise in the last reported quarter. This was possible because of an improved underlying operational performance and prudent capital management.

Stocks to Consider

Aon is not the only stock looking up this earnings season. We see likely earnings beat coming from three other companies in the insurance sector mentioned below:

Arch Capital Group Ltd. ( ACGL ) with an Earnings ESP of +0.95% and a Zacks Rank #1 (Strong Buy).

HCC Insurance Holdings Inc. ( HCC ) with an Earnings ESP of +2.80% and a Zacks Rank #2 (Buy).

Blue Capital Reinsurance Holdings Ltd. ( BCRH ) with an Earnings ESP of +4.62% and a Zacks Rank #3.

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AON PLC (AON): Free Stock Analysis Report

ARCH CAP GP LTD (ACGL): Free Stock Analysis Report

HCC INS HLDGS (HCC): Free Stock Analysis Report

BLUE CAP REINSR (BCRH): 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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