Aon share price forecast after strong Q3 results

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on Oct 30, 2021
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  • Aon reported strong Q3 results
  • Total revenue has increased by 12.5% Y/Y
  • The board of directors declared a $0.51 share quarterly dividend

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Aon plc (NYSE: AON) shares have advanced more than 10% since the beginning of October 2021, and the current price stands at $321. Aon’s business continued to grow throughout the third fiscal quarter, and the company reported better than expected earnings results on Friday.

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The best Q3 in over a decade

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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 reported better than expected third-quarter results on Friday; total revenue has increased by 12.5% Y/Y to $2.7 billion, while the Non-GAAP EPS was $1.74 (beats by $0.04). Greg Case, Chief Executive Officer of Aon, said:

Notably, our strongest growth in over a decade for two quarters in a row, driven by mid-single-digit or greater organic revenue growth from every solution line, highlighted by particular strength in health and commercial risk at 16% and 30%, respectively and adjusted EPS growth of 14%.

Total revenue has increased above the expectations (+100 million), and the company repurchased 4.4 million class A ordinary shares for approximately $1.3 billion during the quarter.

This month, the board of directors declared a $0.51 share quarterly dividend payable on November 15, and the company’s management will continue to advance strategic evolution and deliver higher, more durable returns for shareholders.

Client feedback continues to be outstanding as net promoter scores are at a five-year high, but the operating margin decreased 4,810 basis points to (29.6)% during the quarter. One of the reasons for this is the fact that Aon moved $65 million of expenses into the third quarter from the fourth quarter to be prepared for the potential impact of COVID-19 and potential macroeconomic distress.

In summary, Aon delivered the best third-quarter results in over a decade, and the company’s management remains confident in the strength of the balance sheet and manages liquidity risk through a well-laddered debt maturity profile.

Despite this, Catherine Seifert, an analyst from research company CFRA, downgraded Aon from “buy” to “hold.” Catherine Seifert sees the insurer’s stock as fairly valued after it’s risen more than 50% year to date.

Bulls control the price

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Data source: tradingview.com

Aon shares have advanced more than 50% since the beginning of January 2021, and according to technical analysis, the bulls remain in control of the price action. Rising above $340 supports the continuation of the bullish trend, and the next price target could be located at $350.

On the other side, if the price falls below $300 support, it would be a “sell” signal, and we have the open way to $280.

Summary

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Aon’s business continued to grow throughout the third fiscal quarter, and the company repurchased approximately 4.4 million class A ordinary shares for approximately $1.3 billion. According to technical analysis, the bulls remain in control of the price action, but Catherine Seifert, an analyst from research company CFRA, downgraded Aon from “buy” to “hold.”

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