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Arthur J. Gallagher (AJG) Gains 11% in a Year: Here's Why
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Arthur J. Gallagher & Co. (AJG - Free Report) shares have gained 11% in a year against the industry's decline of 2.8%. The Zacks S&P 500 composite has increased 5.2% in the said time frame. With market capitalization of $17.9 billion, average volume of shares traded in the last three months was 1.4 million.
The company continues to benefit from strategic acquisitions, strong segmental performance, solid capital position and prudent capital deployment. Arthur J. Gallagher delivered positive earnings surprise in each of the last four reported quarters with the average beat being 5.10%.
The stock has a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
What’s Driving Arthur J. Gallagher?
The company's top line has been improving over the years on the back of higher commissions, fees, supplemental and contingent revenues. The metric witnessed CAGR of 7.5% over the last four years (2015-2019). Higher fees, and commission, supplemental and contingent revenues from its Brokerage and Risk Management segments are likely to drive revenues in the days ahead.
The company’s Brokerage segment contributes a major portion of its revenues. Riding on strong demand for claim settlement and administration services, its Risk Management segment contributed 14% to the company’s top-line growth in the past two years. In the first quarter of 2020, this segment accounted for 77% of total revenues.
Arthur J. Gallagher remains focused on expanding its international operations through both acquisitions and organic growth. It derived 31% of its revenues from international markets, primarily Australia, Bermuda, Canada, the Caribbean, New Zealand and the U.K in 2019. A number of strategic acquisitions have boosted its capabilities and diversified operations. These buyouts provide the company with incremental capabilities and services to assist clients across Australia, the UK, Europe and the United States.
So far in 2020, the company has made nine acquisitions whose revenue growth rates generally ranged from 2.5% to 13.8%. It is estimated that mergers and acquisitions will contribute to revenue growth of retail brokerage operations over the next several years.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $3.97 and $4.26, indicating increase of nearly 8.8% and 7.4%, respectively from the year-ago reported figure. Its expected long-term earnings growth is pegged at 10.9%, better than the industry average of 7.7%.
The company’s ability to generate positive cash flow from operations is likely to meet a substantial portion of its cash requirements. It is estimated that the cash flows from operations and borrowings under its Credit Agreement will provide it with adequate resources to meet future liquidity needs.
By virtue of its sound capital and liquidity position, this Zacks Rank #3 (Hold) insurance broker is engaged in prudent capital deployment. The company has increased its dividend at a six-year (2014-2020) CAGR of 3.8%. Its dividend yield of 1.9% betters the industry average of 1.4%. The company also has 122.6 million shares remaining under its buyback authorization.
The Zacks Consensus Estimate for earnings for the current quarter has been revised 2.9% downward over the past seven days.
eHealth, Inc. provides private health insurance exchange services to individuals, families, and small businesses in the United States and China. It surpassed estimates in each of the last four quarters, with the average positive surprise being 78.40%.
CNO Financial develops, markets, and administers health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. It surpassed estimates in three of the last four quarters, with the average positive surprise being 12.5%.
Kinsale Capital provides casualty and property insurance products in the United States. Its earnings beat estimates in two of the last four quarters and missed in the other two, the average positive surprise being 3.44%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Arthur J. Gallagher (AJG) Gains 11% in a Year: Here's Why
Arthur J. Gallagher & Co. (AJG - Free Report) shares have gained 11% in a year against the industry's decline of 2.8%. The Zacks S&P 500 composite has increased 5.2% in the said time frame. With market capitalization of $17.9 billion, average volume of shares traded in the last three months was 1.4 million.
The company continues to benefit from strategic acquisitions, strong segmental performance, solid capital position and prudent capital deployment. Arthur J. Gallagher delivered positive earnings surprise in each of the last four reported quarters with the average beat being 5.10%.
The stock has a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum.
What’s Driving Arthur J. Gallagher?
The company's top line has been improving over the years on the back of higher commissions, fees, supplemental and contingent revenues. The metric witnessed CAGR of 7.5% over the last four years (2015-2019). Higher fees, and commission, supplemental and contingent revenues from its Brokerage and Risk Management segments are likely to drive revenues in the days ahead.
The company’s Brokerage segment contributes a major portion of its revenues. Riding on strong demand for claim settlement and administration services, its Risk Management segment contributed 14% to the company’s top-line growth in the past two years. In the first quarter of 2020, this segment accounted for 77% of total revenues.
Arthur J. Gallagher remains focused on expanding its international operations through both acquisitions and organic growth. It derived 31% of its revenues from international markets, primarily Australia, Bermuda, Canada, the Caribbean, New Zealand and the U.K in 2019. A number of strategic acquisitions have boosted its capabilities and diversified operations. These buyouts provide the company with incremental capabilities and services to assist clients across Australia, the UK, Europe and the United States.
So far in 2020, the company has made nine acquisitions whose revenue growth rates generally ranged from 2.5% to 13.8%. It is estimated that mergers and acquisitions will contribute to revenue growth of retail brokerage operations over the next several years.
The Zacks Consensus Estimate for 2020 and 2021 earnings per share is pegged at $3.97 and $4.26, indicating increase of nearly 8.8% and 7.4%, respectively from the year-ago reported figure. Its expected long-term earnings growth is pegged at 10.9%, better than the industry average of 7.7%.
The company’s ability to generate positive cash flow from operations is likely to meet a substantial portion of its cash requirements. It is estimated that the cash flows from operations and borrowings under its Credit Agreement will provide it with adequate resources to meet future liquidity needs.
By virtue of its sound capital and liquidity position, this Zacks Rank #3 (Hold) insurance broker is engaged in prudent capital deployment. The company has increased its dividend at a six-year (2014-2020) CAGR of 3.8%. Its dividend yield of 1.9% betters the industry average of 1.4%. The company also has 122.6 million shares remaining under its buyback authorization.
The Zacks Consensus Estimate for earnings for the current quarter has been revised 2.9% downward over the past seven days.
Stocks to Consider
Some better-ranked insurance stocks include eHealth, Inc. (EHTH - Free Report) , CNO Financial Group, Inc. (CNO - Free Report) and Kinsale Capital Group, Inc. (KNSL - Free Report) . While eHealth sports a Zacks Rank #1 (Strong Buy), CNO Financial and Kinsale Capital carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
eHealth, Inc. provides private health insurance exchange services to individuals, families, and small businesses in the United States and China. It surpassed estimates in each of the last four quarters, with the average positive surprise being 78.40%.
CNO Financial develops, markets, and administers health insurance, annuity, individual life insurance, and other insurance products for senior and middle-income markets in the United States. It surpassed estimates in three of the last four quarters, with the average positive surprise being 12.5%.
Kinsale Capital provides casualty and property insurance products in the United States. Its earnings beat estimates in two of the last four quarters and missed in the other two, the average positive surprise being 3.44%.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>