Hook / Thesis
Aon continues to look like the kind of business you want in the core of a financials allocation: recurring brokerage cash flow, growing client demand for risk advisory, and improving capital optionality after a major asset sale. The company delivered an EPS beat on the most recent quarter (reported 01/30/2026) while generating strong operating cash flow in its reported quarters, and it just freed up meaningful liquidity via the NFP wealth sale (reported 09/03/2025).
That combination - resilient operating economics plus a clean balance-sheet inflow - supports a buy-the-dip approach. This is a trade idea for investors who want exposure to a high-quality insurance broker with cash returns and buyback optionality, but who also want disciplined risk controls given recent revenue volatility.
What Aon does and why it matters
Aon is a leading global provider of insurance and reinsurance brokerage and HR solutions. The company is tilted toward brokerage operations and operates in over 120 countries with roughly 50,000 employees. Investors should care because brokerage is a high-return, low-capex business where market share, client relationships, and advice-led services (cyber, specialty, risk transfer) drive recurring fee pools and strong free cash flow.
For capital allocators, the brokerage model has three attractive properties: predictable recurring revenue from advisory and placement activity, strong cash conversion, and the ability to return capital to shareholders via dividends and buybacks without heavy reinvestment needs. Aon shows those traits in the numbers below.
Recent results - hard numbers
- Q3 FY2025 (fiscal quarter ended 09/30/2025) revenue: $3.997B; operating income: $816M; net income: $470M; diluted EPS: $2.11 (diluted average shares 216.7M).
- Q2 FY2025 (06/30/2025) revenue: $4.155B; net income: $594M; diluted EPS: $2.66.
- Q1 FY2025 (03/31/2025) revenue: $4.729B; net income: $982M; diluted EPS: $4.43.
- Latest quarter (reported 01/30/2026 for FY2025 Q4) showed EPS actual $4.85 vs estimate $4.78 and revenue actual $4.30B vs estimate $4.43B (beat on EPS, revenue slightly lighter).
- Operating cash generation remains strong: Q3 net cash flow from operating activities (continuing) was $1.148B. Across prior quarters Aon also produced sizable operating cash (Q2: $796M; Q1: $140M reported in the dataset for different quarter definitions), indicating consistent cash conversion.
Net income across the three full reported quarters in the dataset (Q1 + Q2 + Q3) sums to roughly $2.046B. The Q4 EPS print (4.85) implies materially higher Q4 net income when scaled to the diluted share base; using a diluted share estimate near 217M implies Q4 net income roughly in the $1.0B range, putting FY2025 net income in the ~$3.1B neighborhood (this is an estimate because the dataset does not provide a full Q4 net income line item).
Balance sheet and capital moves
- As of Q3 FY2025, total assets were $51.637B with liabilities of $43.438B and equity of roughly $7.939B attributable to the parent.
- Aon reported net proceeds of $2.2B after tax from the sale of its NFP wealth unit on 09/03/2025. That is a clean, near-term cash inflection that management can use for buybacks, debt reduction, or other shareholder returns.
- Dividends are increasing: the quarterly cash dividend declared 01/09/2026 was $0.745 per share (ex-dividend 02/02/2026; pay date 02/13/2026), up from previous quarterly payouts. Annualized at current quarterly level that’s ~$2.98 per year.
Valuation framing
Market snapshot shows a close near $349.64 on the most recent session. The dataset does not provide a market-cap figure, but a rough market-cap estimate using the latest reported diluted average shares (216.7M) and the recent close produces an approximate market cap of $75-76B (216.7M x $349.64 ≈ $75.8B). Because diluted average shares are a proxy rather than the exact outstanding count at market close, treat this as an approximate figure.
If FY2025 net income is on the order of the estimate above (~$3.1B), the forward-looking P/E would be in the mid-20s (≈24x). That is not cheap by absolute standards but reasonable for a high-quality, cash-generative global broker with improving capital optionality following the NFP sale. It also leaves room for multiple expansion if management deploys proceeds into high-ROIC buybacks or if revenue growth re-accelerates.
Trade idea (actionable)
We recommend adding AON on weakness with the following tactical plan for position-sized exposure (position horizon: intermediate - position/swing):
- Entry: Buy a starter position at market up to $360. Prefer to scale into the position on dips to the $330-$340 range; accumulate up to full size at or below $340.
- Initial stop: 7% below entry on a full-sized position (for example, if buying at $350, stop at ~$325). Use position sizing to limit downside to an acceptable portfolio loss.
- Targets:
- Near-term (3-6 months): $380 (roughly +8% from current levels).
- Medium-term (6-12 months): $420 (roughly +20%); justifiable by modest earnings re-acceleration and multiple expansion if buybacks accelerate.
- Stretch / long-term (12-24 months): $480 if Aon executes capital deployment, and organic revenue growth re-accelerates while margins hold.
Rationale: buybacks or debt reductions funded by the $2.2B sale proceeds and continued operating cash flow should support EPS growth even if revenue growth is mid-single digits; that gives a clear path to the targets above.
Catalysts to monitor
- Management’s capital allocation decisions for the NFP proceeds - buybacks or targeted M&A would be positive.
- Quarterly revenue and margin trends, especially whether Q4’s EPS beat is followed by sustained operating margin resilience.
- Insurance pricing environment and commercial lines renewals - a more favorable pricing cycle would lift brokerage volumes and fees.
- Dividend increases or an acceleration in share repurchases (management has been increasing the cash dividend).
Risks and counterarguments
Below are the main risks that could invalidate the thesis, followed by a short counterargument that keeps us constructive:
- Revenue softness / cyclicality: Revenues dipped from Q1 to Q3 in FY2025 (Q1 $4.729B → Q2 $4.155B → Q3 $3.997B). If that trend continues, it will pressure operating leverage and EPS despite one-off proceeds.
- Foreign exchange / macro headwinds: Global brokerage is exposed to FX and macro-driven deal slowdowns. The dataset shows volatile exchange gains/losses across quarters (e.g., Q2 showed a large exchange gain of $500M), which can mask underlying business performance.
- One-time nature of proceeds: The $2.2B after-tax from the NFP sale is a one-time event. If management uses proceeds inefficiently (costly M&A or debt-financed deals), the near-term EPS lift could be transient.
- Valuation complacency: With an estimated market cap near $75-76B, Aon is not a deep-value pick. Disappointment around organic growth or margin pressure could lead to multiple compression and share price downside.
- Regulatory / litigation risk: Large brokers periodically face regulatory scrutiny or litigation tied to placement practices or advisory matters; those outcomes can be binary.
Counterargument: The recent EPS beat (01/30/2026) and the company’s consistently strong operating cash flow argue that even if top-line growth pauses, Aon can still deliver shareholder value through disciplined buybacks and a higher dividend. That optionality is what makes weakness a tactical buying opportunity rather than a reason to sell out completely.
What would change our mind
We would become more cautious if:
- Management demonstrates poor capital deployment of the $2.2B proceeds (accretive buybacks vs dilutive M&A would be the dividing line).
- Revenue weakness persists for multiple quarters and operating margins compress materially (operating income falling below a mid-single-digit margin on a sustained basis).
- Material adverse regulatory or litigation outcomes hit earnings or capital requirements.
Conclusion
Aon’s most recent prints and its $2.2B cash release make the stock attractive to investors who want a high-quality, cash-generative insurance broker with visible shareholder-return optionality. We view the business as a core position for investors targeting durable financial-sector businesses, but recommend disciplined entries and clear stops because of revenue volatility and valuation sensitivity.
Trade plan summary: long AON, accumulate on dips toward $330-$340, initial stop ~7% below entry, targets $380/$420/$480. We remain constructive but data-driven: execution on capital allocation and subsequent organic revenue stabilization are the keys that will convert this into a sustained multi-quarter winner.
Important dates referenced
- Q3 FY2025 filing date: 10/31/2025.
- Q4 FY2025 earnings announcement (EPS actual): 01/30/2026.
- Dividend declaration: 01/09/2026 (ex-dividend 02/02/2026, pay date 02/13/2026).
- Net proceeds from NFP sale reported: 09/03/2025.
Disclosure
This is not financial advice. The trade idea above is a suggested plan for informed investors; trade size and stop placement should reflect your personal risk tolerance and portfolio construction rules.