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Tickers in this Article: AON
When Aon (NYSE:AON) releases its second quarter earnings on Friday, July 27, 2012, it is expected to report earnings that are up 21.7% from a year ago. The consensus estimate is $1.01 per share, up from earnings of 83 cents per share a year ago.

Investors care about earnings because they drive stock prices. Strong earnings generally result in the stock price moving up and vice versa. SEE: How To Decode A Company's Earnings Reports

What to Expect: Whereas the consensus estimate was $1.10 three months ago, it has since fallen. Analysts are expecting earnings of $4.10 per share for the fiscal year.

Aon is expected to beat last year's reported revenue of $2.79 billion and come in at $2.89 billion for the quarter. The anticipated revenue for the fiscal year is $11.64 billion.

Company Performance: Aon has reported revenue increases for the past four quarters. It rose 2.3% in the first quarter, 3.2% in the fourth quarter of the last fiscal year, 52.3% in the third quarter of the last fiscal year and 46.5% in the second quarter of the last fiscal year.

Relative to the industry P/E ratio of 18.75, AON's 16.1 is low. A low P/E might arise due to substantial inherent risk of the firm and its operations, poor return on equity, or improper valuation of the market. One of the most important estimates of stock market valuation is the price/earnings ratio (P/E ratio). To determine the P/E ratio, an investor divides the market price of the stock by the earnings-per-share (EPS) of the stock. SEE: Understanding The P/E Ratio

The stock price has fallen 11.1% since April 26, 2012, from $51.97 to $46.18. Currently, Aon's stock is on a downward trend. The share price has fallen $1.64 since July 18, 2012.

The Competition: Aon provides risk management and human capital consulting services, including insurance and reinsurance brokerage and workforce productivity solutions. The majority of analysts (nine of 17) give Aon a buy rating. In the last three months, the number of buy ratings has increased slightly.

The company's closest competitor in the insurance (miscellaneous) industry is Marsh (MMC). Analysts are less optimistic about Aon than about Marsh. Thirteen out of 17 analysts rate the latter a buy.

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