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Arthur J. Gallagher (AJG) Gains 25% YTD: More Upside Left?
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Shares of Arthur J. Gallagher (AJG - Free Report) rallied 25.1% year to date (YTD) compared with the industry’s growth of 20.2%, the Finance sector’s rise of 7.2% and the Zacks S&P 500 composite’s gain of 11.8%. With a market capitalization of $61.7 billion, the average volume of shares traded in the last three months was 0.9 million.
The strong performance of Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment drive this Zacks Rank #2 (Buy) insurance broker.
AJG has a stellar record of delivering earnings surprises in the last 24 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 20.7% over the last five years, better than the industry average of 13.8%.
Image Source: Zacks Investment Research
Can the Stock Retain the Momentum?
Arthur J. Gallagher has geographically diversified operations with strong domestic as well as international presence. This ensures uninterrupted revenue generation. 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.
AJG has an impressive organic growth track. A strong pipeline with about $550 million of revenues, associated with almost 60 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.
Arthur J. Gallagher targets 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. This insurance broker thus 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 to be 9% and margins around 20.5% in 2024.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 earnings per share (EPS) is pegged at $10.15, indicating an increase of 15.9% on 14.5% higher revenues of $11.4 billion. The consensus estimate for 2025 EPS is pegged at $11.38, indicating an increase of 12.1% on 9.9% higher revenues of $12.5 billion. The long-term earnings growth rate is currently 11.7%.
AJG’s wealth distribution to shareholders in the form of dividend hikes and share repurchases is backed by its solid capital position. 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.
Other Stocks to Consider
Some other top-ranked stocks from the insurance brokerage industry are Erie Indemnity (ERIE - Free Report) , Brown & Brown (BRO - Free Report) and Willis Towers Watson plc (WTW - Free Report) .
Erie Indemnity’s earnings surpassed estimates in three of the last four quarters and missed once, the average earnings surprise being 11.57%. Year to date, shares of ERIE have surged 36.6%.
The Zacks Consensus Estimate for ERIE’s 2024 and 2025 earnings indicates 33.8% and 25.3% year-over-year growth, respectively. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 30.6% and 8.3% increase year over year.
BRO delivered a four-quarter average earnings surprise of 9.8%. Shares of BRO have risen 40.9% YTD. It carries a Zacks Rank #2 at present.
Willis Towers’ earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 7.06%. Year to date, WTW’s stock has gained 14.5%.
The Zacks Consensus Estimate for WTW’s 2024 and 2025 earnings implies 14.6% and 11.9% year-over-year growth, respectively. It carries a Zacks Rank #2 at present.
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Arthur J. Gallagher (AJG) Gains 25% YTD: More Upside Left?
Shares of Arthur J. Gallagher (AJG - Free Report) rallied 25.1% year to date (YTD) compared with the industry’s growth of 20.2%, the Finance sector’s rise of 7.2% and the Zacks S&P 500 composite’s gain of 11.8%. With a market capitalization of $61.7 billion, the average volume of shares traded in the last three months was 0.9 million.
The strong performance of Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment drive this Zacks Rank #2 (Buy) insurance broker.
AJG has a stellar record of delivering earnings surprises in the last 24 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 20.7% over the last five years, better than the industry average of 13.8%.
Image Source: Zacks Investment Research
Can the Stock Retain the Momentum?
Arthur J. Gallagher has geographically diversified operations with strong domestic as well as international presence. This ensures uninterrupted revenue generation. 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.
AJG has an impressive organic growth track. A strong pipeline with about $550 million of revenues, associated with almost 60 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.
Arthur J. Gallagher targets 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. This insurance broker thus 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 to be 9% and margins around 20.5% in 2024.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 earnings per share (EPS) is pegged at $10.15, indicating an increase of 15.9% on 14.5% higher revenues of $11.4 billion. The consensus estimate for 2025 EPS is pegged at $11.38, indicating an increase of 12.1% on 9.9% higher revenues of $12.5 billion. The long-term earnings growth rate is currently 11.7%.
AJG’s wealth distribution to shareholders in the form of dividend hikes and share repurchases is backed by its solid capital position. 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.
Other Stocks to Consider
Some other top-ranked stocks from the insurance brokerage industry are Erie Indemnity (ERIE - Free Report) , Brown & Brown (BRO - Free Report) and Willis Towers Watson plc (WTW - Free Report) .
Erie Indemnity’s earnings surpassed estimates in three of the last four quarters and missed once, the average earnings surprise being 11.57%. Year to date, shares of ERIE have surged 36.6%.
The Zacks Consensus Estimate for ERIE’s 2024 and 2025 earnings indicates 33.8% and 25.3% year-over-year growth, respectively. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Brown and Brown’s 2024 and 2025 earnings indicates a respective 30.6% and 8.3% increase year over year.
BRO delivered a four-quarter average earnings surprise of 9.8%. Shares of BRO have risen 40.9% YTD. It carries a Zacks Rank #2 at present.
Willis Towers’ earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 7.06%. Year to date, WTW’s stock has gained 14.5%.
The Zacks Consensus Estimate for WTW’s 2024 and 2025 earnings implies 14.6% and 11.9% year-over-year growth, respectively. It carries a Zacks Rank #2 at present.