Is AON stock a buy in August 2021?

By: Stanko Iliev
Stanko Iliev
Stanko dedicates himself to providing investors with relevant information they can use to make investment decisions. He loves the… read more.
on Aug 2, 2021
  • Aon repurchased approximately 1.1 million shares for around $240 million in Q2
  • An analyst from research company Raymond James upgraded Aon to "market perform" last week
  • If the price jumps above $270 resistance, the next target could be around $280

Aon plc (NYSE: AON) shares have advanced more than 7% since the beginning of July 2021; the company reported better than expected second-quarter results last week and expects to see even better trends in the upcoming quarter.

Fundamental analysis: Aon repurchased approximately 1.1 million shares in the second quarter

Aon is a British multinational professional services firm that sells a range of financial risk-mitigation products, including insurance, pension administration, and health insurance plans. Aon’s business continues to grow throughout the second fiscal quarter, and the company reported better than expected earnings results last week.

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Total revenue has increased by 16% Y/Y to $2.9 billion, while the Non-GAAP EPS was $2.29 (beats by $0.44). The operating margin has decreased 50 basis points to 23.3%, mainly due to the fact that Aon moved $135 million of expenses into the second quarter from the fourth quarter to be prepared for the potential impact of COVID-19 and potential macroeconomic distress.

“We ended the second quarter in a position of strength as our Aon United strategy in investments in long term growth are driving strong top and bottom-line performance, while the termination of our combination with Willis Towers Watson was not the outcome we originally intended, the opportunity for Aon has only grown,” said Christa Davies, Chief Financial Officer of Aon.

During the second quarter, Aon repurchased approximately 1.1 million shares for around  $240 million while the company’s management remains confident in the strength of the balance sheet and manages liquidity risk through a well-laddered debt maturity profile.

Gregory Peters, an analyst from research company Raymond James, upgraded Aon to “market perform” in July as he thinks that AON stock is more attractive than Marsh & McLennan. According to Gregory Peters, Aon should have a higher level of profitability in the upcoming quarters as the adjusted EBITDA margin should be above 30% by 2022.

Aon continues to respond to the needs of its clients in the best possible, the company’s outlook remains stable, and with a market capitalization of $58 billion, shares of this company are reasonably valued.

Technical analysis: Bulls remain in control of the price action

Data source: tradingview.com

Aon shares have advanced more than 7% since the beginning of July 2021, and according to technical analysis, the bulls remain in control of the price action. Rising above $270 supports the continuation of the bullish trend, and the next price target could be located around $280.

On the other side, if the price falls below $250, it would be a “sell” signal, and we have the open way to $230.

Summary

Aon’s business continues to grow throughout the second fiscal quarter, and the company repurchased approximately 1.1 million shares for around  $240 million in the last three months. According to technical analysis, the bulls remain in control of the price action, and if the price jumps above $270 resistance, the next target could be around $280.

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