Key Takeaways
- Aon shares rose 5% after third-quarter organic revenue growth of 6% and a 10% rise in adjusted EPS.
- Aon said new business and client retention drove the growth as pricing softens.
- Brown & Brown grew organic revenue just 1.2% last quarter; Willis Towers Watson and Arthur J. Gallagher report Thursday.
- Aon trades below its five-year average forward P/E, with buybacks on hold while it pays down debt.
Aon (AON) stock jumped 5% today after third-quarter results showed it can keep growing as insurance prices cool.
That’s the test for every big broker. Brown & Brown (BRO) just fell short of it, and Willis Towers Watson (WTW) and Arthur J. Gallagher (AJG) take it Thursday.
What Aon Reported
Aon’s quarter beat analysts’ estimates:
- Organic revenue grew 6%.
- The adjusted operating margin widened 70 basis points to 27.0%.
- Adjusted EPS rose 10% to $3.36.
Aon Grew Despite Softer Pricing
Aon said new clients and retention drove Commercial Risk’s 7% organic growth, with pricing and exposures adding only slightly. Reinsurance also grew 7%, though that included $24 million of revenue Aon had held back in earlier periods, and pricing there was a drag.
Brown & Brown CEO J. Powell Brown pointed to “a challenging rate environment” on Monday. Its organic growth was 1.2%, and its adjusted EBITDAC margin fell to 34.6% from 36.6% a year earlier.
Willis Towers Watson’s Risk & Broking segment grew 7% organically in the second quarter, and its margin rose 100 basis points to 22.2%. If it holds that pace in Thursday morning’s report, Aon isn’t the exception.
Gallagher reports Thursday evening. In the second quarter, its brokerage and risk management segments grew 6% organically, but its core brokerage commissions and fees grew just 4%. That’s its number to watch.
TIKR Tracks 21 Analysts on Aon. How Many Say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Aon, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Aon’s Analyst Ratings
Buybacks Can Wait
Once its USI deal closes, expected in the fourth quarter, Aon plans to pay down debt and bring leverage back to 2.8x to 3.0x in about 24 months.
It bought back no stock in the third quarter. A 2% drop in its diluted share count from a year earlier helped EPS this quarter, and that help shrinks while buybacks wait.
Analysts expect revenue to climb from $17.2 billion in fiscal 2025 to $22.8 billion in fiscal 2028:
The jump in 2027, from $17.9 billion to $21.7 billion, is far more than organic growth alone, so USI likely accounts for most of it. Nothing in this quarter points to cuts.
Aon traded at 16x forward earnings at the last close, nearer its five-year low of 14x than its 20x average:
At today’s price, it’s about 17x.
Thursday Will Show Whether Aon Is the Exception
Aon just showed it can grow despite softer pricing, and at 17x the market still isn’t paying much for that. Thursday decides how much of it is Aon and how much is the sector: a strong WTW quarter would make this a broker-wide story, while a soft one would make Aon’s 6% look even better.
So what is Aon stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
