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Arthur J. Gallagher (AJG) Up 37% YTD: More Room for Upside?
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Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 36.9% year to date, outperforming the industry’s increase of 27.7% and the Finance sector’s increase of 22.3%. The S&P 500 composite index has risen 28.6% in the said time frame. With a market capitalization of $35.1 billion, the average volume of shares traded in the last three months was 0.9 million.
Image Source: Zacks Investment Research
Solid results at its 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.
Arthur J. Gallagher is the world’s largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues. It has a stellar track record of beating estimates in the last 13 quarters.
Can AJG Stock Retain the Momentum?
The Zacks Consensus Estimate for 2022 earnings indicates a year-over-year improvement of 10.8% on 3.2% higher revenues. The expected long-term earnings growth rate is pegged at 12.9%, better than the industry average of 12.2%. It has a favorable Growth Score of B.
The consensus estimate has moved 1.7% north in the past seven days, reflecting analysts’ optimism.
Its organic growth efforts should continue to drive revenues, courtesy of growing contributions from its Brokerage and Risk Management segments.
The broker boasts an impressive inorganic growth story. Arthur J. Gallagher completed 19 mergers, representing about $190 million of annualized revenues through the first nine months of 2021. The merger and acquisition pipeline is quite strong with about $400 million of revenues, associated with about 50 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 revenue to increase.
The broker’s focus on lowering costs should drive margins.
Arthur J. Gallagher has a solid financial position fueled by strong operational performance. Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a six-year CAGR of 4.8%. The dividend yield is 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors. AJG has a $1.5 billion share repurchase authorization in place.
Upbeat Guidance
Arthur J. Gallagher estimates organic growth at the Brokerage segment to be better than the 2020 level. Given the rebound in employment, economic activity and solid new business, it further estimates organic growth in Risk Management in the fourth quarter of 2021 of more than 10%. Full-year 2021 organic growth is expected to be in double digits and the EBITDAC margin is expected to remain above 19%.
Arthur J. Gallagher expects $30 million in expense savings in the fourth quarter of 2021 and estimates margins to be above 19% in the fourth quarter and 2021.
Annual cash flows in 2022 are expected to increase by about $125 million to $150 million.
The Zacks Consensus Estimate for Brown & Brown’s 2022 earnings indicates a 5.1% year-over-year increase. BRO delivered a four-quarter average surprise of 18.33%.
The Zacks Consensus Estimate for Ryan Specialty’s 2022 earnings implies a 12.6% year-over-year increase. RYAN delivered an average earnings surprise of 18.33% in the last-reported quarter.
The Zacks Consensus Estimate for 2022 earnings of Berkshire’s 2022 earnings suggests a 6.8% year-over-year increase. BRK.B has a four-quarter average surprise of 5.53%. . Shares of Brown & Brown, Ryan Specialty and Berkshire have gained 49.9%, 44.8% and 29.9%, respectively, year to date.
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Arthur J. Gallagher (AJG) Up 37% YTD: More Room for Upside?
Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 36.9% year to date, outperforming the industry’s increase of 27.7% and the Finance sector’s increase of 22.3%. The S&P 500 composite index has risen 28.6% in the said time frame. With a market capitalization of $35.1 billion, the average volume of shares traded in the last three months was 0.9 million.
Solid results at its 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.
Arthur J. Gallagher is the world’s largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues. It has a stellar track record of beating estimates in the last 13 quarters.
Can AJG Stock Retain the Momentum?
The Zacks Consensus Estimate for 2022 earnings indicates a year-over-year improvement of 10.8% on 3.2% higher revenues. The expected long-term earnings growth rate is pegged at 12.9%, better than the industry average of 12.2%. It has a favorable Growth Score of B.
The consensus estimate has moved 1.7% north in the past seven days, reflecting analysts’ optimism.
Its organic growth efforts should continue to drive revenues, courtesy of growing contributions from its Brokerage and Risk Management segments.
The broker boasts an impressive inorganic growth story. Arthur J. Gallagher completed 19 mergers, representing about $190 million of annualized revenues through the first nine months of 2021. The merger and acquisition pipeline is quite strong with about $400 million of revenues, associated with about 50 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 revenue to increase.
The broker’s focus on lowering costs should drive margins.
Arthur J. Gallagher has a solid financial position fueled by strong operational performance. Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a six-year CAGR of 4.8%. The dividend yield is 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors. AJG has a $1.5 billion share repurchase authorization in place.
Upbeat Guidance
Arthur J. Gallagher estimates organic growth at the Brokerage segment to be better than the 2020 level. Given the rebound in employment, economic activity and solid new business, it further estimates organic growth in Risk Management in the fourth quarter of 2021 of more than 10%. Full-year 2021 organic growth is expected to be in double digits and the EBITDAC margin is expected to remain above 19%.
Arthur J. Gallagher expects $30 million in expense savings in the fourth quarter of 2021 and estimates margins to be above 19% in the fourth quarter and 2021.
Annual cash flows in 2022 are expected to increase by about $125 million to $150 million.
Stocks to Consider
Some better-ranked stocks include Brown & Brown (BRO - Free Report) , Ryan Specialty Group (RYAN - Free Report) and Berkshire Hathaway (BRK.B - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Brown & Brown’s 2022 earnings indicates a 5.1% year-over-year increase. BRO delivered a four-quarter average surprise of 18.33%.
The Zacks Consensus Estimate for Ryan Specialty’s 2022 earnings implies a 12.6% year-over-year increase. RYAN delivered an average earnings surprise of 18.33% in the last-reported quarter.
The Zacks Consensus Estimate for 2022 earnings of Berkshire’s 2022 earnings suggests a 6.8% year-over-year increase. BRK.B has a four-quarter average surprise of 5.53%.
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Shares of Brown & Brown, Ryan Specialty and Berkshire have gained 49.9%, 44.8% and 29.9%, respectively, year to date.