Aon plc Stock: Is AON Underperforming the Financial Sector?

Financial (names A - I) - Aon plc_ office sign- by JHVEPhoto via Shutterstock

Based in Dublin, Ireland, Aon plc (AON) is a leading professional services firm with a market cap of $64.5 billion. Operating in the risk management and human capital sectors, it provides a diverse range of services, including insurance and reinsurance brokerage, health and wealth solutions, and strategic consulting globally.

Companies valued at $10 billion or more are generally considered “large-cap” stocks, and AON fits this criterion perfectly. AON, employing over 50,000 people globally, is renowned for its integrated risk and human capital solutions, leveraging advanced analytics and local expertise to serve clients in 120 countries.

However, AON saw a 15.1% pullback from its 52-week high of $347.37, achieved in June last year. Over the past three months, AON's shares have dropped by 9.7%, underperforming the marginal decline in the broader S&P 500 Financials Sector SPDR (XLF) over the same period.

Over the longer term, AON's stock is up 1.4% on a YTD basis, underperforming XLF's 9.4% gains. Additionally, AON's shares have plunged 10.6% over the past 52 weeks, while XLF has returned 24.1% during the same period. 

To confirm the bearish price trend, AON's stock has been trading below its 50-day and 200-day moving averages since April.

AON has underperformed primarily due to concerns over increased operating expenses, including legal settlement charges, transaction costs related to acquisitions, and ongoing impacts from foreign currency translation and pension costs.

Plus, the stock slipped nearly 6.9% on Apr. 26 following its Q1 earnings report, which missed analysts' projection primarily due to underperformance in its U.S. retail brokerage business. Despite growth in other regions, challenges in the U.S. market, including lower net new business and ongoing external capital markets impacts, contributed to investor disappointment and the consequent share price drop.

Also, AON has underperformed its rival, Marsh & McLennan Companies, Inc. (MMC). MMC's shares have jumped 18.5% over the past 52 weeks and 13.3% on a YTD basis, compared to AON's weaker performance in both these periods.    

Given the stock’s underwhelming price action, analysts are cautious about its prospects. The stock has a consensus rating of “Hold” from the 19 analysts covering it, and the mean price target of $320.88 indicates a premium of just 8.2% to current levels.

More Stock Market News from Barchart
On the date of publication, Sohini Mondal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.