BMO Capital Maintains Market Perform Rating on Aon plc (AON) Post Q1; PT to $90

BMO Capital Markets reiterated a Hold rating on Aon plc (NYSE: AON) while raising its target price to $90 (from $88) following the release of 1Q15 results. AON experienced strong organic growth in 1Q15 with 3% compared to 1.2% last year, however still lower than the expected 3.4%.

Analyst Charles Sebaski comments, "When looking at the different segments, most of the drag in expected underlying growth was contributed by the reinsurance brokerage unit. For 1Q15, the organic growth in the Risk Solutions segment was 4% compared with 3% in 1Q14 and was also higher than our 3% estimate. The Aon Benfield segment 1Q15 organic revenue declined -1% compared with a 3% increase in 1Q14 and was also lower than our estimate of a 3% increase. The organic growth in the HR solutions segment was 4% compared with 2% in 1Q14 and in line with our 4% estimate. Consequently, we lowered 2015E consolidated organic growth by 30 bps to 3.3% and by 10 bps to 3.3% for 2016E."

He added, "AON has shown incremental EPS growth for several years as its main focus continues to be on shareholder value creation. The company posted 1Q15 adjusted EPS of $1.37 a share, which was above 1Q14 adjusted EPS of $1.28 and our estimate of $1.27. The adjusted EPS figure excludes intangible asset amortization and discontinued operations to provide a better reflection of core operational earnings. Share buybacks have also provided a boost to EPS. AON repurchased 2.5 million shares in 1Q15, which was lower than our estimated 7 million shares. This was accomplished during AON’s weak est seasonal quarter in regard to free cash flow, and we expect management to continue its pace of share buybacks as the current repurchase program has $5.4 billion remaining under authorization. As a result, we raised 2015E adjusted EPS by $0.15 to $6.10 and 2016E EPS by $0.20 to $6.76."

For an analyst ratings summary and ratings history on Aon Corp click here. For more ratings news on Aon Corp click here.

Shares of Aon Corp closed at $98.80 yesterday.

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