On Tuesday, Wells Fargo (NYSE:WFC) analysts upgraded Aon Corp (NYSE:NYSE:AON) stock from Equal Weight to Overweight.
The revised outlook reflects a positive view on the company's prospects, anticipating an improvement in organic growth, particularly in Commercial Risk, as capital markets and mergers and acquisitions (M&A) activities are expected to rebound throughout 2025.
The upgrade is based on the assessment that Aon has overcome its previous challenges, with organic revenue showing signs of stabilization and M&A revenue beginning to recover.
The analysts adjusting the price target upward to $410 from $377 also noted that the company's National Flood Program (NFP) is contributing to its growth, albeit to a lesser extent. Moreover, compared to its peer, Marsh & McLennan Companies (NYSE:MMC), which trades at 21.9 times its 2025 earnings per share (EPS), Aon's shares are currently valued at 20.0 times its 2025 EPS, presenting an attractive entry point for Wells Fargo.
The analysts expect Aon to maintain a positive trajectory in its Commercial Risk sector, which has not exhibited any issues that could impede its performance.
Given this outlook, Wells Fargo has also raised its EPS estimates for Aon for the years 2025 and 2026 to $17.70 and $19.95, up from the previous estimates of $17.60 and $19.70, respectively.
The new price target of $410 is derived from a blend of valuation methods, including price-to-earnings (P/E), enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), and free cash flow (FCF) metrics. Wells Fargo's analysts underscored this decision by stating that the worst appears to be behind Aon, with the company poised for continued improvement in the coming years.
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