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Here's Why You Should Retain Arthur J. Gallagher (AJG) Stock
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The strong performance of Arthur J. Gallagher’s (AJG - Free Report) Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment poise it well for growth.
This Zacks Rank #3 (Hold) insurance broker has a stellar record of delivering earnings surprises in the last 23 quarters. Earnings of the world’s largest property/casualty third-party claims administrator and the world’s fourth-largest insurance broker based on revenues increased 18.4% over the last five years, better than the industry average of 13.8%.
An Outperformer
Shares of the insurance broker have gained 17.6% year to date, compared with the industry’s increase of 12.2%, the Finance sector’s rise of 4.6% and the Zacks S&P 500 composite’s increase of 14.9%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 earnings per share (EPS) is pegged at $10.08, indicating an increase of 15.1% on 15.7% higher revenues of $11.5 billion. The consensus estimate for 2025 EPS is pegged at $11.25, indicating an increase of 11.6% on 9.7% higher revenues of $12.6 billion.
The long-term earnings growth rate is currently 10.5%. It has a Growth Score of A.
Growth Drivers
The insurer remains focused on generating both organic (particularly international) and inorganic growth and is thus tapping into growth opportunities across the globe. This, coupled with solid retention and improving renewal premium across all major geographies and most product lines, bodes well for growth. It expects 2024 organic revenues and adjusted EBITDAC margins of the Risk Management and Brokerage segments to be better than the 2023 levels.
In the Brokerage segment, AJG expects organic growth to be 7-9% in 2024. In the Risk Management segment, the company expects organic growth in the 9-11% range and margins around 20.5% in 2024.
Arthur J. Gallagher’s revenues are geographically diversified with strong domestic as well as international operations. Its international operations contribute about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contribution to total revenues to trend up.
Its inorganic growth is impressive. A strong pipeline with about $350 million of revenues, associated with almost 40 term sheets, either agreed upon or being prepared, is well supported by AJG’s M&A capacity of $3.5 billion in 2024 and $4.5 billion in 2025 without using any equity.
Wealth Distribution
Banking on its capital position, AJG distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has increased at a three-year CAGR of 7.7% and currently yields 1%. The board of directors also approved a $1.5 billion share buyback program.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Palomar Holdings (PLMR - Free Report) , ProAssurance (PRA - Free Report) and Brown and Brown (BRO - Free Report) .
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings implies 371.4% and 71.6% year-over-year growth, respectively. It sports a Zacks Rank #1.
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 28.5% and 8% increase year over year.
BRO delivered a four-quarter average earnings surprise of 11.90%. Shares of BRO have risen 28.6% year to date. It carries a Zacks Rank #2 (Buy).
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Here's Why You Should Retain Arthur J. Gallagher (AJG) Stock
The strong performance of Arthur J. Gallagher’s (AJG - Free Report) Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment poise it well for growth.
This Zacks Rank #3 (Hold) insurance broker has a stellar record of delivering earnings surprises in the last 23 quarters. Earnings of the world’s largest property/casualty third-party claims administrator and the world’s fourth-largest insurance broker based on revenues increased 18.4% over the last five years, better than the industry average of 13.8%.
An Outperformer
Shares of the insurance broker have gained 17.6% year to date, compared with the industry’s increase of 12.2%, the Finance sector’s rise of 4.6% and the Zacks S&P 500 composite’s increase of 14.9%.
Image Source: Zacks Investment Research
Optimistic Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 earnings per share (EPS) is pegged at $10.08, indicating an increase of 15.1% on 15.7% higher revenues of $11.5 billion. The consensus estimate for 2025 EPS is pegged at $11.25, indicating an increase of 11.6% on 9.7% higher revenues of $12.6 billion.
The long-term earnings growth rate is currently 10.5%. It has a Growth Score of A.
Growth Drivers
The insurer remains focused on generating both organic (particularly international) and inorganic growth and is thus tapping into growth opportunities across the globe. This, coupled with solid retention and improving renewal premium across all major geographies and most product lines, bodes well for growth. It expects 2024 organic revenues and adjusted EBITDAC margins of the Risk Management and Brokerage segments to be better than the 2023 levels.
In the Brokerage segment, AJG expects organic growth to be 7-9% in 2024. In the Risk Management segment, the company expects organic growth in the 9-11% range and margins around 20.5% in 2024.
Arthur J. Gallagher’s revenues are geographically diversified with strong domestic as well as international operations. Its international operations contribute about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contribution to total revenues to trend up.
Its inorganic growth is impressive. A strong pipeline with about $350 million of revenues, associated with almost 40 term sheets, either agreed upon or being prepared, is well supported by AJG’s M&A capacity of $3.5 billion in 2024 and $4.5 billion in 2025 without using any equity.
Wealth Distribution
Banking on its capital position, AJG distributes wealth to shareholders in the form of dividend hikes and share repurchases. Its dividend has increased at a three-year CAGR of 7.7% and currently yields 1%. The board of directors also approved a $1.5 billion share buyback program.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Palomar Holdings (PLMR - Free Report) , ProAssurance (PRA - Free Report) and Brown and Brown (BRO - Free Report) .
Palomar’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 15.10%. In the past year, PLMR’s stock has surged 54.8%.
The Zacks Consensus Estimate for PLMR’s 2024 and 2025 earnings indicates 25.8% and 16.1% year-over-year growth, respectively. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
ProAssurance earnings surpassed estimates in two of the last four quarters and missed in the other two. In the past year, PRA’s stock has lost 2.5%.
The Zacks Consensus Estimate for PRA’s 2024 and 2025 earnings implies 371.4% and 71.6% year-over-year growth, respectively. It sports a Zacks Rank #1.
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 28.5% and 8% increase year over year.
BRO delivered a four-quarter average earnings surprise of 11.90%. Shares of BRO have risen 28.6% year to date. It carries a Zacks Rank #2 (Buy).