AON Delivers Double-Digit Growth In 1Q

Aon (AON) had an impressive 1Q as a result of its outstanding operational performance. Shares of the global professional service company rallied as investors reacted to a 10% increase in revenue to $3.5 billion.

Revenue growth was driven mainly by strong retention and net new business generation. Aon also benefited from a 5% reduction in its operating expenses.

Net income attributable to shareholders increased 18% to $913 million, or $4 a share. Cash flow from operations was up 66% to $561 million, as free cash flow increased 91% to $532 million. During the quarter, Aon purchased 0.2 million Class A ordinary shares, valued at $50 million. (See Aon stock analysis on TipRanks)

“In the first quarter, our colleagues delivered an outstanding operational performance including 6% organic revenue growth and 170 basis points of margin improvement, building on over a decade of progress on our key financial metrics, creating momentum for 2021, and demonstrating the power of Aon United,” said CEO Greg Case.

Impressed by strong organic growth numbers and earnings, Wells Fargo analyst Elyse Greenspan reiterated a Buy rating. According to the analyst, AON is well-positioned for mid-single-digit or greater revenue growth in 2021.

“AON is positioned to show a pick up in organic revenue growth as we move through 2021 and should continue to improve its margins. Overall, we view the WLTW acquisition favorably (expected to close in H1 2021) and believe the company’s accretion guidance could prove to be conservative and especially expect them to exceed the $800 million of expense savings for the transaction,” Greenspan wrote in a research note to investors.

The analyst has a $287 price target on Aon, implying a 14.14% upside potential to current levels.

The consensus among analysts on Wall Street is that AON is a Moderate Buy, based on 3 Buy, 3 Hold and 1 Sell ratings. The average analyst price target of $258.67 implies a 2.88% upside potential to current levels.

AON scores a 6 out of 10 on TipRanks’ Smart Score rating system, suggesting its performance is likely to align with market averages. 

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