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Analyst Blog

On Jan 16, 2014, shares of Arthur J. Gallagher & Co. (AJG - Analyst Report) touched a new 52-week high of $48.79. The shares of the insurance broker have been gaining momentum with an impressive tally of 11 acquisitions in the fourth quarter of 2013. Shares have gained almost 11% since the onset of fourth quarter.

Share Drivers

Arthur J. Gallagher made eleven acquisitions during the fourth quarter of 2013 which compares favorably with the third quarter tally during which the company undertook eight acquisitions with annualized revenue of $135.5 million.

Some of its latest acquisitions include Missouri-based employee benefit brokerage and consulting services provider, Jenkins and Associates, Island-based Cleaveland Insurance Group, New Jersey-based McIntyre Risk Management, and many more.

The company’s strong financial position supports its series of acquisitions.

Arthur J. Gallagher regularly undertakes acquisitions to augment its product and service offerings as well as leverage its international footprint. These initiatives should aid the company’s earnings performance going forward. Arthur J. Gallagher & Co. is set to release its fourth quarter 2013 earnings results on Jan 28, 2014. The Zacks Consensus Estimate for 2013 and 2014 is currently pegged at $2.14 and $2.52, respectively.

However, valuation for Arthur J. Gallagher & Co. looks a little stretched. The shares are trading at 16.2% premium to the peer group average on price-to-book basis and at 15.6% premium on price-to-earnings basis, while the return on equity is at 13.7% premium to the peer group average.

Arthur J. Gallagher & Co. presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks worth considering in the financial sector include CNO Financial Group, Inc. (CNO - Analyst Report), Kemper Corporation (KMPR - Snapshot Report) and Prudential plc (PUK - Snapshot Report). All these stocks sport a Zacks Rank #1 (Strong Buy).