Aon Faces Challenges With Integration Risks And Slow Growth: BofA Downgrades Stock

BofA Securities analyst Grace Carter downgraded Aon plc AON to Underperform from Neutral and cut the price target from $345 to $306.

The analyst writes that AON has recently underperformed the insurance broker peer group owing to below-average organic growth, integration risk from the $13.4 billion NFP acquisition, and management changes. 

Notably, since 2H22, Aon’s Commercial Risk Solutions segment has reported organic revenue growth in the 3%- 6% range , compared to comparable peer results averaging 7%- 10%, says the analyst. 

Carter projects gradual improvement in organic growth but concedes a downside compared to the estimates if current challenges persist more than expected.

The analyst says re-establishing investor confidence could take time for the company, slowing a return to historical valuation levels.

The analyst sees EPS of $11.93 for FY24 and $14.83 for FY25, sharply below the consensus.

In April, AON reported first quarter FY24 adjusted EPS of $5.66, missing the consensus of $5.91 and sales of $4.070 billion, coming below the street view of $4.126 billion. 

Investors can gain exposure to the stock via Litman Gregory Funds Trust Polen Capital International Growth ETF PCIG and Hennessy Stance ESG ETF STNC.

Also Read: Aon Analysts Slash Their Forecasts After Downbeat Earnings

Price Action: AON shares are down 1.51% at $285.61 at the last check Wednesday. 

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