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

Aon plc (NYSE:AON) is set to report first-quarter 2017 results on May 10, before the market opens. Last quarter, the company posted a positive earnings surprise of 2.81%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Aon’s strategic investments to strengthen underlying performance and numerous initiatives to maximize return on invested capital bode well. We expect the company to have generated better operating leverage from its Risk Solutions segment.

Aon’s continuous improvement in client leadership in renewal book portfolio through a proactive client partnership – Aon Client Promise – raises optimism. The company is likely to have increased retention rates. This in turn is expected to boost its revenues across the globe.

Significant investments in innovative technology as well as data and analytics, including Aon InPoint and the recently launched Risk Insight Platform are likely to have driven business in the first quarter.

The acquisition of Admix at year-end 2016 boosted the company’s inorganic growth and is expected to have contributed to revenues.

Continued business generation in Aon’s client treaty and increase in facultative placements are also likely to have facilitated growth of its reinsurance business.

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

Its divesture of non-core operations is likely to have driven better results through improvement in the core businesses.

Aon’s share repurchase programs are likely to have boosted its margin by limiting the outstanding share count.

However, the company is expected to suffer from unfavorable market conditions, especially pricing pressures in various countries across Europe and Asia.

Despite certain divestments, Aon’s first-quarter earnings are likely to be affected by rising expenses related to its non-core operations.

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

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 +7.81%. This is because the Most Accurate estimate is pegged at $1.38 whereas the Zacks Consensus Estimate stands at $1.28. 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 #4 (Sell).

As it is 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:

Athene Holding Ltd. (NYSE:ATH) , which is expected to report first-quarter earnings on May 10, has an Earnings ESP of +3.03% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Banco De Chile (NYSE:BCH) has an Earnings ESP of +0.74% and a Zacks Rank #2. The company is set to report first-quarter earnings on May 8.

Banco Santander (MC:SAN) Brasil SA (NYSE:BSBR) has an Earnings ESP of +14.29% and a Zacks Rank #3. The company is set to report first-quarter earnings on May 10.

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