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Headquartered in Dublin, Ireland, Aon plc (AON) is a multinational corporation providing risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing. With a market cap of $72.2 billion, It operates globally, offering services to personal lines, mid-market companies, and multinational firms.
Shares of the leading insurance broker have trailed behind the broader market over the past year. The gap has narrowed in 2024, as the stock rose 14.1%, compared to SPX’s 16.5% return on a YTD basis.
Shares of the leading insurance broker have underperformed the broader market over the past year. While AON stock has surged 3.4% over this time frame, the S&P 500 Index ($SPX) has rallied by 26.1%. However, the gap has narrowed in 2024, with Aon shares rising 14.1%, slightly trailing SPX’s YTD gains of 16.5%.
Narrowing the focus, AON has also underperformed the SPDR S&P Insurance ETF (KIE), which has gained 27.8% over the past year.
Aon's lackluster stock performance can be linked to rising operating expenses, largely fueled by increased compensation, benefits, and costs tied to the Aon United program. Furthermore, it also faces additional pressure from escalating interest expenses linked to higher debt levels.
On Jul. 26, Aon released its Q2 earnings report, leading to an 8% rise in its stock. The company exceeded analysts' revenue estimates but fell short on earnings, missing market expectations by 5.2%.
For the current fiscal year, ending in December, analysts expect AON’s EPS to rise 7.9% year over year to $15.25. Nonetheless, the company’s earnings surprise history is disappointing, with Aon surpassing the consensus estimate in only one of the last four quarters and missing expectations in the other three quarters.
Aon stock has a consensus “Hold” rating overall. Out of 20 analysts covering the stock, four recommend a "Strong Buy," one suggests a “Moderate Buy,” 11 indicate a "Hold," one advises a "Moderate Sell," and the remaining three give it a “Strong Sell” rating.
The configuration has been stable over the past months.
On Jul. 29, RBC Capital raised Aon's price target to $335 from $315, maintaining a “Sector Perform” rating. Despite Q2 results falling short of expectations, the company's organic growth improved, aligning more closely with peers after previous underperformance, according to the analyst.
The mean price target of $336.67 suggests a 1.4% premium from AON’s current price levels. The Street-high price target of $413 reflects an upside potential of 24.4%.
On the date of publication, Kritika Sarmah did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
