Aon Plc (NYSE:AON) shares were downgraded to "Hold" from "Buy" and price target lowered to $52 from $55 by Deutsche Bank analyst Yaron Kinar.
The analyst continues to expect long-term earnings growth from Aon, built on the investments currently made in the business. "However, as these upfront investments infringe on margins and associated revenues are not expected to pick-up materially before 2013, we find it difficult to recommend the stock at this time," Kinar wrote in a note.
"With no short-term growth and trading at a mere 7 percent discount to its strongly executing peer, MMC, we do not see a near-term catalyst on the horizon. We are downgrading to Hold," the analyst said.
Kinar said Risk Solutions' organic growth is improving as challenging conditions abate. He believe that most of the challenges in this segment are in International Retail, which should benefit from investment in talent as the new hires gear up.
"Moreover, more robust carrier revenues should further boost top line starting in 2013. In HR Solutions, growth is much more predicated on an improving economy and we believe that organic revenue growth will continue to be modest in the foreseeable future, though the company is positioning itself well," Kinar wrote.
The analyst values AON multiples slightly below the group average to reflect stagnant earnings in coming quarters. "Risks: Slowing revenue growth would result in margin contraction and in the company missing our EPS estimates while improving market conditions may drive stronger than expected results."
Shares of the insurance and reinsurance brokerage company added 3 cents to trade at $47.86 on Tuesday.