Aon plc Class A Ordinary Shares (UK)(NYSE: AON)  has reported the adjusted earnings per share of $2.56 in the fourth quarter 2016 ended 31^st December, beating the analysts’ estimates for the adjusted earnings per share of $2.49 due to the strength in its retail business. The company had reported the adjusted revenue of $3.3 billion in the fourth quarter 2016, missing the analysts’ estimates for revenue of $3.4 billion. The adjusted operating margin has expanded 210 basis points to 26.2%. The free cash flow has increased 22% to $2.1 billion for 2016. The company’s net income attributable to shareholders fell to $502 million in the fourth quarter ended Dec. 31, from $584 million, a year earlier. The stock slightly rose by 0.08% (as of 10:55 AM EST; Source: Google finance)

On the other hand, AON has agreed to sell its employee benefits outsourcing business to private equity firm Blackstone Group LP for up to $4.8 billion. For this transaction, Blackstone will pay $4.3 billion as upfront and up to an additional $500 million based on future performance. Moreover, AON expects the deal to improve its return on invested capital and will get added to the adjusted earnings per share in 2018. The proceeds from the deal after tax are expected to be about $3 billion, subject to customary working capital and other adjustments. AON will also use the part of the proceeds to buy back shares, and raised its repurchase program by $5 billion to $7.7 billion. In addition, the deal will allow AON to exit a mature, capital-intensive outsourcing business and the company will able to focus on growth areas such as cybersecurity and health insurance. Blackstone will have to pay AON a termination fee of $215 million if the deal gets through.

The inorganic growth strategies and cost containment measures form the basis for AON’s operational strength. The company intends to continue with its acquisition activities globally, particularly in the emerging economies, in order to reach out to more clients. However, AON is exposed to catastrophes that can affect its financials adversely. Moreover, the increased debt levels, competitive threats, and pressures from lawsuits raise caution.

AON stock has risen 25.98% in a year (source: Google Finance). According to tipranks.com, 5 analysts has covered the stock while recommending a “Hold”. AON has an average price target of $119, which is a further upside of 3.33%.