Chicago-based insurance broker Aon received a downgrade fromMerrill Lynch yesterday from “Buy” to “Neutral.”
|While Aon's stock is within 2.6 percent of Merrill's priceobjective of $38, and in a comparable brokerage and consulting firmit would allow it to raise its price target modestly, Merrill saidit did not see enough upside to maintain a “Buy” rating on theshares.
|Merrill said it was also lowering its 2007 and 2008 earnings pershare estimates by 10 cents to $2.75 and $3.05, respectively. Thelower estimate was due to a more conservative view of buybackactivity in the near term.
|Merrill said it expected Aon to take the proceeds from the saleof its insurance company units to buy back more stock, but it doesnot appear the firm plans to pursue an accelerated buybackprogram.
|Merrill also reduced its earnings per share estimate by one centto $2.01 for 2006.
|Aon is expected to gain some market share over the next severalyears, Merrill said, but organic growth will be challenged by thecontinued soft market.
|The company's cost saving's plan should improve Aon's margin,but it may not be as dramatic going forward as it has in thepast.
|Aon's stock closed down 22 cents yesterday at $36.80.
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