Aon plcAON is set to report third-quarter 2017 results on Oct 27, before the market opens.
Last quarter, the insurance broker's earnings were in line with the Zacks Consensus Estimate. Earnings rose 4.3% year over year on the back of revenue growth.
The company has an impressive surprise history. It surpassed estimates in three of the last four quarters with an average beat of 4.2%. This is depicted in the graph below:
Aon PLC Price and EPS Surprise
Factors to be Considered This Quarter
The results of its Risk Solution segment are expected to be positively impacted by the strategic investments. The company's invested capitals in numerous initiatives are likely to generate better returns in the third quarter.
We expect a rise in retention rates on the back of proactive client partnerships, which in turn is expected to strengthen the top-line base across geographical regions.
The company's investments in technological upgrades as well as in data and analytics are likely to drive business in the to-be-reported quarter.
The company's Health and Reinsurance Solutions is expected to continue to perform well in the third quarter, bolstering its top line.
Aon is always engaged in enhancing shareholders' value. Its share repurchase programs might favor its margin by limiting the outstanding share count.
Nevertheless, the company may suffer from unfavorable market conditions, especially pricing pressures in various countries across Europe and Asia.
Operations in Latin America and Asia are likely to be affected by macroeconomic conditions, in turn putting pressure on the top line.
Rising operating expenses might continue to weigh on the margins in the third quarter as well.
Heavy dependence on debt financing might push up interest expenses, impacting the margins adversely.
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 -0.96%. This is because both the Most Accurate estimate is pegged at $1.26 while the Zacks Consensus Estimate stands at $1.27. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .
Zacks Rank : Although Aon's Zacks Rank #2 increases the predictive power of ESP, we need to have a positive 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 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:
Prudential Financial, Inc. PRU , which is expected to report third-quarter earnings on Nov 1, has an Earnings ESP of +0.07% and a Zacks Rank #2. You can see the complete list of today's Zacks #1 Rank stocks here .
Lincoln National Corporation LNC has an Earnings ESP of +0.05% and a Zacks Rank #2. The company is set to report third-quarter earnings on Nov 1.
National Retail Properties. NNN has an Earnings ESP of +0.47 % and a Zacks Rank #2. The company is set to report third-quarter earnings on Nov 2.
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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.