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On Oct 1, Zacks Investment Research upgraded Arthur J Gallagher & Co. (AJG - Analyst Report) to a Zacks Rank #2 (Buy).

Why the Upgrade?

Arthur J Gallagher & Co. has been witnessing rising earnings estimates on the back of its impressive inorganic growth story. Moreover, with respect to its earnings performance this insurance broker delivered positive earnings surprises in 3 of the last 4 quarters, with an average beat of 8.7%. The long-term expected earnings growth rate for this stock is 13%.    

The Zacks Consensus Estimate for 2013 increased 0.5% to $2.21 per share as 4 of 12 estimates were revised higher over the last 30 days. For 2014, the same number of estimates moved north over the same time frame, lifting the Zacks Consensus Estimate by 1.6% to $2.59 per share.

Arthur J. Gallagher & Co. undertakes acquisitions to augment its product and service offerings as well as to expand its international exposure. The company made six acquisitions in the third quarter. This also compares favorably with five acquisitions (with annualized revenues totaling $35.9 million) closed successfully in the preceding quarter. Arthur J. Gallagher & Co.’s strong financial position continues to support its acquisition strategy.

The series of recent acquisitions include adding New York-based fine arts broker team of Jeffrey Haber and Michael Fischman; Kent, England-based Belmont International; Eau Claire, Wis.-based R. W. Scobie, Inc.; and, London-based Giles Group of Companies to its portfolio. In August, Arthur J. Gallagher & Co added Ottawa, Ontario–based Dickinson & Associates, Inc. and Short Hills, N.J.-based Bollinger, Inc.

In the last reported quarter, Arthur J Gallagher & Co. posted earnings of 73 cents, 5.8% above the Zacks Consensus Estimate. We expect Arthur J. Gallagher & Co. to deliver another positive earnings surprise when it reports its third quarter results. This is because our proven model shows that the insurance broker has the right combination of a positive Earnings ESPand Zacks Rank.  Expected Surprise Prediction or ESP, which represents the difference between the Most Accurate Estimate and the Zacks Consensus Estimate, is +3.23%.

Other Stocks to Consider

Insurance brokers Brown & Brown Inc. (BRO - Analyst Report) with a Zacks Rank #1 (Strong Buy) and Aon plc (AON - Analyst Report) and eHealth, Inc. (EHTH - Snapshot Report), both with a Zacks Rank #2 (Buy) are worth considering.