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Arthur J. Gallagher (AJG) Up 28% in a Year: More Upside Left?
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Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 27.7% in a year, outperforming the industry’s and the Finance sector’s increase of 15.4% and 8.5%, respectively. The S&P 500 composite index has risen 13.6% in the said time frame. With a market capitalization of $33 billion, the average volume of shares traded in the last three months was about 1 billion.
Image Source: Zacks Investment Research
Strong performing Brokerage and Risk Management segments, strategic buyouts to capitalize on growing markets opportunities, effective capital deployment and upbeat guidance, continue to drive this Zacks Rank #3 (Hold) insurance broker.
This largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues has a stellar track record of beating estimates in the last 14 quarters.
Can AJG Retain the Momentum?
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $6.05, indicating a 10.4% increase from the year-ago reported figure on 6.7% higher revenues of $8.7 billion. The consensus estimate for 2023 earnings stands at $6.88, indicating a 13.8% increase from the year-ago reported figure on 9.5% higher revenues of $9.5 billion.
The expected long-term earnings growth rate is pegged at 11.6%, better than the industry average of 9.6%.
The consensus estimates for 2022 has moved north by 0.7%, while that of 2023 moved up 1.2% in the past 30 days, reflecting analysts’ optimism.
Sustained solid performance at Brokerage and Risk Management segments are likely to continue driving revenues. Focus on lowering costs is likely to favor margins.
The broker boasts an impressive inorganic growth story. AJG closed 38 mergers with more than $1 billion of estimated annualized revenues and more than 110 basis points of adjusted EBITDAC margin expansion in 2021. The company’s merger and acquisition pipeline is quite strong, with about $200 million of revenues, associated with about 35 term sheets either agreed upon or being prepared.
Given the number and size of the non-U.S. acquisitions, AJG expects international contribution to total revenues to increase. Presently, international operations contribute about one-third to total revenues.
Arthur J. Gallagher has a solid financial position fueled by strong operational performance. AJG has a $1.5 billion share repurchase authorization in place.
Solid Dividend History
Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a seven-year CAGR (2015-2021) of 3.8%, with dividends currently yielding 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors.
Upbeat Guidance
Arthur J. Gallagher estimates EBITDAC margin is expected to remain close to 19% at Risk Management. Continued strong retention combined with new client wins in the fourth quarter of 2021 are likely to drive organic growth in the high single-digit range in 2022. The revenue momentum is expected to continue into 2022.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 36.4%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.
United Fire’s earnings surpassed estimates in each of the last four quarters, the average surprise being 275.45%. In the past year, United Fire has declined 11.8%.
The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 30 days.
Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 35.84%. In the past year, Arch Capital has rallied 31.6%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 2.9% and 1.6% north, respectively, in the past seven days. Arch Capital’s expected long-term earnings growth rate is pegged at 10%.
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Arthur J. Gallagher (AJG) Up 28% in a Year: More Upside Left?
Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 27.7% in a year, outperforming the industry’s and the Finance sector’s increase of 15.4% and 8.5%, respectively. The S&P 500 composite index has risen 13.6% in the said time frame. With a market capitalization of $33 billion, the average volume of shares traded in the last three months was about 1 billion.
Image Source: Zacks Investment Research
Strong performing Brokerage and Risk Management segments, strategic buyouts to capitalize on growing markets opportunities, effective capital deployment and upbeat guidance, continue to drive this Zacks Rank #3 (Hold) insurance broker.
This largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues has a stellar track record of beating estimates in the last 14 quarters.
Can AJG Retain the Momentum?
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $6.05, indicating a 10.4% increase from the year-ago reported figure on 6.7% higher revenues of $8.7 billion. The consensus estimate for 2023 earnings stands at $6.88, indicating a 13.8% increase from the year-ago reported figure on 9.5% higher revenues of $9.5 billion.
The expected long-term earnings growth rate is pegged at 11.6%, better than the industry average of 9.6%.
The consensus estimates for 2022 has moved north by 0.7%, while that of 2023 moved up 1.2% in the past 30 days, reflecting analysts’ optimism.
Sustained solid performance at Brokerage and Risk Management segments are likely to continue driving revenues. Focus on lowering costs is likely to favor margins.
The broker boasts an impressive inorganic growth story. AJG closed 38 mergers with more than $1 billion of estimated annualized revenues and more than 110 basis points of adjusted EBITDAC margin expansion in 2021. The company’s merger and acquisition pipeline is quite strong, with about $200 million of revenues, associated with about 35 term sheets either agreed upon or being prepared.
Given the number and size of the non-U.S. acquisitions, AJG expects international contribution to total revenues to increase. Presently, international operations contribute about one-third to total revenues.
Arthur J. Gallagher has a solid financial position fueled by strong operational performance. AJG has a $1.5 billion share repurchase authorization in place.
Solid Dividend History
Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a seven-year CAGR (2015-2021) of 3.8%, with dividends currently yielding 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors.
Upbeat Guidance
Arthur J. Gallagher estimates EBITDAC margin is expected to remain close to 19% at Risk Management. Continued strong retention combined with new client wins in the fourth quarter of 2021 are likely to drive organic growth in the high single-digit range in 2022. The revenue momentum is expected to continue into 2022.
Strong operating cash flows are expected in 2022.
Stocks to Consider
Some better-ranked insurers include Kinsale Capital Group (KNSL - Free Report) , United Fire Group (UFCS - Free Report) and Arch Capital Group (ACGL - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 32.04%. In the past year, Kinsale Capital has rallied 36.4%.
The Zacks Consensus Estimate for KNSL’s 2022 and 2023 earnings has moved 3.8% and 3.5% north, respectively, in the past seven days.
United Fire’s earnings surpassed estimates in each of the last four quarters, the average surprise being 275.45%. In the past year, United Fire has declined 11.8%.
The Zacks Consensus Estimate for UFCS’ 2022 and 2023 earnings has moved 122.2% and 76.9% north, respectively, in the past 30 days.
Arch Capital’s earnings surpassed estimates in each of the last four quarters, the average beat being 35.84%. In the past year, Arch Capital has rallied 31.6%.
The Zacks Consensus Estimate for ACGL’s 2022 and 2023 earnings has moved 2.9% and 1.6% north, respectively, in the past seven days. Arch Capital’s expected long-term earnings growth rate is pegged at 10%.