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Aon plc's (AON) Q3 Earnings: What's in Store for the Stock?

Aon plcAON is set to report its third-quarter 2018 results on Oct 26, before the market opens. Last reported quarter, the insurance broker's earnings surpassed the Zacks Consensus Estimate and rose 4.91% year over year.

The company flaunts an impressive surprise history. Its earnings exceeded estimates in all the last four quarters with an average beat of 3.34%. For the to-be reported quarter, the Zacks Consensus Estimate for its bottom line is pegged at $1.23, down 4.6% year over year.

Factors to be Considered This Quarter to be Reported

Aon plc's rising operating expenses due to organic and inorganic investments might continue to weigh on the margins. The company is likely to endure a high financial leverage, which has been rising since 2014 due to a high commercial paper outstanding. The company has likely witnessed a rise in interest expenses as well.

However, its performance is likely to be supported by strategic investments, constant efforts to boost technological capabilities and an improved portfolio mix. The company might witness an increased operating leverage and free cash flow.

Aon plc is expected to continue with its solid organic revenue momentum, backed by the Commercial Risk Solutions segments, increasing over the last few quarters.

Due to the company's consistent investments in data and analytics, we expect its revenues from Data & Analytics services to be around $302 million, up 4.5% from the year-ago quarter.

The Zacks Consensus Estimate for Commercial Risk Solutions segment revenues indicates a rise of 7.2% in the third quarter. However, the same metric from the Reinsurance segment is pegged at $263 million, down by 35% year over year.

The Zacks Consensus Estimate for third-quarter revenues stands at $2.4 billion, up 2% year over year.

What the Quantitative Model States

Per our proven model, Aon plc is not likely to beat on earnings this quarter to be reported. This is because the stock needs the right combination of a positive Earnings ESP and a favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen, which is not the case here.

Earnings ESP: Aon plc has an Earnings ESP of -4.62%. This is because the Most Accurate Estimate is pegged at $1.84, lower than the Zacks Consensus Estimate of $1.93. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter .

Aon plc Price and EPS Surprise

Aon plc Price and EPS Surprise | Aon plc Quote

Zacks Rank: Aon plc carries a Zacks Rank #3, which increases the predictive power of ESP. However, when combined with an Earnings ESP of -4.62%, surprise prediction is left inconclusive.

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

Stocks to Consider

Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:

Everest Re Group, Ltd. RE has an Earnings ESP of +7.29% and a Zacks Rank #3. The company is set to announce third-quarter earnings on Oct 30. You can see the complete list of today's Zacks #1 Rank stocks here .

American Financial Group, Inc. AFG has an Earnings ESP of +4.92% and is a #3 Ranked player. The company is set to announce third-quarter earnings on Oct 30.

Willis Towers Watson Public Limited Company WLTW has an Earnings ESP of +3.91% and a Zacks Rank of 3. The company is set to release 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.


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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