On Monday, RBC Capital adjusted its outlook on Aon Corp (NYSE:AON), a professional services firm providing a range of risk, retirement, and health solutions. The firm's analyst lowered the price target to $315 from the previous $325 while maintaining a Sector Perform rating on the stock.
The revision follows Aon's first-quarter performance where organic growth was reported to have slowed, particularly in the Commercial Solutions segment. However, the Reinsurance and Health segments showed solid organic growth. The company also experienced a healthy margin improvement, with a year-over-year increase of 100 basis points. RBC Capital anticipates further margin expansion as Aon implements cost reduction strategies.
The completion of the acquisition of NFP, a leading insurance broker and consultant, was also noted in the assessment. This acquisition is expected to be dilutive to Aon's results in 2024 but accretive by 2026. Despite the potential long-term benefits of the NFP acquisition, the analyst suggests that investors might adopt a cautious stance, preferring to observe the progress of integration and margin improvement efforts before fully assessing the impact on Aon's value.
The report reflects an expectation of continued margin growth for Aon, driven by cost-cutting measures. The inclusion of NFP's results in the company's financial estimates marks a significant milestone, with the deal anticipated to enhance Aon's performance in the coming years despite initial dilution.
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