Aon (AON) To Report Q1 Earnings: What's In The Cards?

Aon plc (NYSE:AON) is set to report first-quarter 2018 results on May 4, before market open.

Last quarter, the insurance broker's earnings surpassed the Zacks Consensus Estimate and rose 0.43% year over year on the back of revenue growth.

The company has an impressive surprise history. It surpassed estimates in each of the last four quarters, with an average beat of 3.82%. This is depicted in the graph below:

Factors to Be Considered This Quarter

We expect organic revenue growth in every major revenue line, including double-digit growth in Data and Analytic Services. Operating margin should benefit from core operational improvement and savings from investments in its Aon United operating model.

The company’s results should reflect strong growth in U.S. retail which should be driven by new business generation and strong management of its renewable book portfolio. Internationally, solid growth set by both Asia and Pacific regions, should buoy earnings.

Results should also showcase strong growth in its captive management business, reflecting its leadership position in this space.

Aon has invested capital in numerous strategic initiatives to boost the performance of its Risk Solution segment. The segment is likely to perform well in the first quarter on the back of these investments.

We expect a favorable impact from foreign currency translation due primarily to a weaker U.S. dollar, in the first quarter.

We expect that U.S. tax reform to feel a modest upward pressure on the effective tax rate.

Debt to EBIDTA, which was 3.2 at the end of Dec 31, 2017, will be elevated in the first quarter as a result of the same of outsourcing business.

The company is committed toward enhancing shareholders’ value. Its share repurchase programs might favor the margin by limiting the outstanding share count.

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 -0.23%. 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, which increases the predictive power of ESP. However, we need to have a positive ESP to be confident about an earnings surprise.

Stocks to Consider

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

Willis Towers Watson Public Ltd. Co. (NASDAQ:WLTW) is expected to report first-quarter 2018 earnings results on May 7. The company has an Earnings ESP of +0.24% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

National General Holdings Corp. (NASDAQ:NGHC) is expected to report first-quarter 2018 earnings results on May 7. The company has an Earnings ESP of +5.59% and a Zacks Rank #1.

Cigna Corp. (NYSE:CI) has an Earnings ESP of +0.62% and a Zacks Rank #3. The company is expected to report first-quarter earnings results on May 3.

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