Last Update12 Sep 25Fair value Increased 0.58%
Analysts have raised Aon's price target slightly to $414.20, citing solid organic growth driven by talent investments, better-than-expected Q2 performance, and relative resilience to P&C market softness, though some caution remains due to high valuation and tight earnings expectations.
Analyst Commentary
- Bullish analysts expect Aon's investments in talent, particularly in construction, energy, and health, to drive increased organic growth, with productivity gains materializing in late 2025 and beyond.
- Several bullish price target increases reflect better-than-expected Q2 results and more consistent net-new business growth, leading to higher medium-term EPS estimates.
- Insurance brokerages, including Aon, are viewed as less impacted by the ongoing softening in P&C market conditions, providing a relative advantage compared to direct carriers amid industry transition.
- Enhanced client engagement and expanded use of data analytics are highlighted as drivers for sustaining results despite a cautious macroeconomic backdrop.
- Bearish analysts express concerns that Aon's valuation already fully reflects its EPS growth outlook, with tight earnings expectations increasing potential risk for near-term stock underperformance if estimates are not met.
What's in the News
- Aon is nearing the sale of its NFP wealth business to Madison Dearborn for $3B, after previously acquiring it for $13B; proceeds are expected to fund investments in AI and core insurance operations (Financial Times).
- The divestment of NFP reflects Aon's focus on shedding non-core assets to streamline its business and reallocate capital (Financial Times).
- Aon is being sued for alleged fraud related to insurance-linked securities marketed for bankrupt technology company Vesttoo; the company denies wrongdoing and claims to be a victim of Vesttoo's fraud (Financial Times).
- Aon's spokesperson has stated that Vesttoo's bankruptcy estate is attempting to shift blame for deliberate fraud onto Aon, and the company intends to defend itself vigorously against the lawsuit (Financial Times).
- Aon is considering the potential sale of Wealthspire Advisors, a $31B wealth manager acquired in the NFP transaction, with UBS acting as financial advisor in the process (Citywire).
Valuation Changes
Summary of Valuation Changes for Aon
- The Consensus Analyst Price Target remained effectively unchanged, moving only marginally from $411.83 to $414.20.
- The Future P/E for Aon remained effectively unchanged, moving only marginally from 28.18x to 28.34x.
- The Consensus Revenue Growth forecasts for Aon remained effectively unchanged, at 5.6% per annum.
Key Takeaways
- Strategic acquisitions and investments in middle-market opportunities and Aon Business Services are driving revenue growth and improving operational efficiencies.
- Client demand for risk solutions and strategic capital allocation are expected to enhance sustainable revenue growth and shareholder returns.
- Aon's revenue growth may be constrained by macroeconomic volatility, softer market conditions, higher debt, and unfavorable currency fluctuations.
Catalysts
About Aon- A professional services firm, provides a range of risk and human capital solutions worldwide.
- The acquisition of NFP has provided Aon with high-quality middle-market EBITDA through targeted acquisitions, which is expected to contribute significantly as the year progresses, impacting revenue growth.
- Aon's 3x3 Plan and the deployment of Risk Analyzers have increased new business and improved client retention, strengthening the foundation for ongoing revenue growth and margin expansion.
- Investment in priority hires and expanding Aon Business Services (ABS) capabilities are creating capacity to fund growth initiatives and drive operational efficiencies, benefiting net margins and earnings.
- Despite macroeconomic uncertainties, Aon sees increased demand from clients for their risk solutions, as they navigate complex trade and economic environments, supporting sustainable revenue growth.
- Aon's commitment to capital allocation, including continued leverage reduction and strategic middle-market acquisitions, is expected to enhance free cash flow growth and shareholder returns.
Aon Future Earnings and Revenue Growth
Assumptions
How have these above catalysts been quantified?- Analysts are assuming Aon's revenue will grow by 5.6% annually over the next 3 years.
- Analysts assume that profit margins will increase from 15.5% today to 19.5% in 3 years time.
- Analysts expect earnings to reach $3.8 billion (and earnings per share of $19.0) by about September 2028, up from $2.6 billion today. The analysts are largely in agreement about this estimate.
- In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 28.2x on those 2028 earnings, down from 30.4x today. This future PE is greater than the current PE for the US Insurance industry at 14.3x.
- Analysts expect the number of shares outstanding to decline by 0.3% per year for the next 3 years.
- To value all of this in today's terms, we will use a discount rate of 7.2%, as per the Simply Wall St company report.
Aon Future Earnings Per Share Growth
Risks
What could happen that would invalidate this narrative?- The unpredictable and turbulent business environment, including macroeconomic volatility and geopolitical risks, could impact client discretionary spending, thereby affecting Aon's revenue growth.
- Tariff issues and trade complexities present significant risks for clients, potentially impacting Aon's ability to maintain steady revenue growth if clients reduce spending on insurance and risk advisory services.
- Softer market conditions in Commercial Risk, particularly with April 1 property rates in the U.S. and Japan down 5% to 20%, may limit revenue growth despite efforts to offset pricing impacts with expanded service offerings.
- The higher debt burden and interest costs following the NFP acquisition may pressure net margins and pose challenges in achieving expected earnings growth if cash flows don't improve as projected.
- Currency exposure and a stronger dollar hurt Aon's margins in Q1 2025; such forex impacts could continue to affect earnings if unfavorable exchange rate movements persist.
Valuation
How have all the factors above been brought together to estimate a fair value?- The analysts have a consensus price target of $411.828 for Aon based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $451.0, and the most bearish reporting a price target of just $349.0.
- In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $19.7 billion, earnings will come to $3.8 billion, and it would be trading on a PE ratio of 28.2x, assuming you use a discount rate of 7.2%.
- Given the current share price of $366.38, the analyst price target of $411.83 is 11.0% higher.
- We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.
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Disclaimer
AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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