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Arthur J. Gallagher (AJG) Q1 Earnings Top on Margin Expansion
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Arthur J. Gallagher & Co. (AJG - Free Report) reported first-quarter 2023 adjusted net earnings of $3.03 per share, which beat the Zacks Consensus Estimate by 1% and our estimate of $2.98. Moreover, the bottom line increased about 7.8% on a year-over-year basis.
Total revenues were $2,672.9 million, up 11.2% year over year, primarily driven by higher commissions, fees and supplemental, contingent revenues and investment income. Moreover, the top line beat the Zacks Consensus Estimate by 0.3% and our estimate of $2,605.2 million.
The quarterly results benefited from higher adjusted revenues and margin expansion across the Brokerage and the Risk Management segments, partially offset by higher expenses.
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher’s total expense increased 10.7% year over year to $2,100.3 million, attributed to higher compensation, higher operating cost, reimbursements, higher interest, depreciation and change in estimated acquisition earnout payables. The figure is higher than our estimate of $1,981.3 million.
Adjusted earnings before interest, tax, depreciation, amortization and change in estimated acquisition earnout payables (EBITDAC) grew 11.8% from the prior-year quarter to $874.9 million. The figure is lower than our estimate of $896.3 million.
Segment Results
Brokerage: Adjusted revenues of $2,375 million increased 14.1% year over year on higher commissions, fees, supplemental and contingent revenues and investment income. This metric missed the Zacks Consensus Estimate by 1.2% but beat our estimate of $2,296.8 million. Strong results were supported by new business production, renewal premium increases and consistently stable retention.
Adjusted EBITDAC climbed 14.6% from the prior-year quarter to $958.4 million while the margin expanded 20 basis points (bps) to 40.4%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 0.9%.
Expenses increased 12% to $1,684.3 million, driven by higher compensation, operating, depreciation, and change in estimated acquisition earnout payables.
Risk Management: Adjusted revenues were up 16.2% year over year to $297.5 million on higher fees. However, the metric missed the Zacks Consensus Estimate by 1.6% and our estimate of $307.9 million. Strong results from this segment were caused by continued growth from new business wins, the New Zealand cyclone and flooding contributing to the upside.
Adjusted EBITDAC increased 28% year over year to $57.1 million, while the margin expanded 180 bps to 19.2%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 17.4%.
Expenses increased 10.8% to $285.3 million because of higher compensation, operating cost and reimbursements.
Corporate: EBITDAC was negative $57.2 million compared with negative $32.4 million in the year-ago quarter.
Financial Update
As of Mar 31, 2023, total assets were $45,094.4 million, up from $38,358.4 million at 2022-end.
As of Mar 31, 2023, cash and cash equivalents increased to $1,549.9 million from $842.3 million at 2022-end.
Shareholders’ equity increased 7.3% from Dec 31, 2022, to $9,858.3 million as of Mar 31, 2023.
Acquisition Update
In the quarter, the company closed 10 acquisitions with estimated annualized revenues of $69 million.
2023 Guidance
Management of AJG expects organic growth in the brokerage segment to be between 7% and 9% in 2023, the mid-point of which indicates a deterioration of 17.5% from the 2022 figure of 9.7%.
Adjusted EBITDAC margin are expected to rise between 60 and 80 bps in 2023, the mid-point of which indicates a 30% decrease from the 2022 rise of 100 bps.
Organic growth in the Risk Management segment is expected to be between 12% and 13% in 2023, the mid-point of which indicates a 6% fall from the 2022 figure of 13.3%.
Adjusted EBITDAC margin in the Risk Management segment is expected to rise more than 19% for 2023, indicating a 2.7% rise from the 2022 figure of 18.5%.
Marsh & McLennan Companies, Inc. (MMC - Free Report) reported first-quarter 2023 adjusted earnings per share of $2.53, which outpaced the Zacks Consensus Estimate of $2.45 by 3.3%. The bottom line advanced 10% year over year.
Consolidated revenues of MMC amounted to $5,924 million, which rose 7% year over year. The figure improved 9% on an underlying basis. The top line beat the consensus mark by 1.3%.
Willis Towers Watson Public Limited Company (WTW - Free Report) delivered first-quarter 2023 adjusted earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line improved 6.8% year over year.
The solid performance of WTW’s Health, Wealth & Career segment and lower expenses were offset by the soft performance of the Risk & Broking segment.
Brown & Brown, Inc.’s (BRO - Free Report) first-quarter 2023 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate by 3.7%. The bottom line increased 13.5% year over year.
The quarterly results reflected improved organic growth and higher net investment income, partly offset by higher expenses.
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Arthur J. Gallagher (AJG) Q1 Earnings Top on Margin Expansion
Arthur J. Gallagher & Co. (AJG - Free Report) reported first-quarter 2023 adjusted net earnings of $3.03 per share, which beat the Zacks Consensus Estimate by 1% and our estimate of $2.98. Moreover, the bottom line increased about 7.8% on a year-over-year basis.
Total revenues were $2,672.9 million, up 11.2% year over year, primarily driven by higher commissions, fees and supplemental, contingent revenues and investment income. Moreover, the top line beat the Zacks Consensus Estimate by 0.3% and our estimate of $2,605.2 million.
The quarterly results benefited from higher adjusted revenues and margin expansion across the Brokerage and the Risk Management segments, partially offset by higher expenses.
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher & Co. price-consensus-eps-surprise-chart | Arthur J. Gallagher & Co. Quote
Operational Update
Arthur J. Gallagher’s total expense increased 10.7% year over year to $2,100.3 million, attributed to higher compensation, higher operating cost, reimbursements, higher interest, depreciation and change in estimated acquisition earnout payables. The figure is higher than our estimate of $1,981.3 million.
Adjusted earnings before interest, tax, depreciation, amortization and change in estimated acquisition earnout payables (EBITDAC) grew 11.8% from the prior-year quarter to $874.9 million. The figure is lower than our estimate of $896.3 million.
Segment Results
Brokerage: Adjusted revenues of $2,375 million increased 14.1% year over year on higher commissions, fees, supplemental and contingent revenues and investment income. This metric missed the Zacks Consensus Estimate by 1.2% but beat our estimate of $2,296.8 million. Strong results were supported by new business production, renewal premium increases and consistently stable retention.
Adjusted EBITDAC climbed 14.6% from the prior-year quarter to $958.4 million while the margin expanded 20 basis points (bps) to 40.4%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 0.9%.
Expenses increased 12% to $1,684.3 million, driven by higher compensation, operating, depreciation, and change in estimated acquisition earnout payables.
Risk Management: Adjusted revenues were up 16.2% year over year to $297.5 million on higher fees. However, the metric missed the Zacks Consensus Estimate by 1.6% and our estimate of $307.9 million. Strong results from this segment were caused by continued growth from new business wins, the New Zealand cyclone and flooding contributing to the upside.
Adjusted EBITDAC increased 28% year over year to $57.1 million, while the margin expanded 180 bps to 19.2%. Adjusted EBITDAC for the quarter beat the Zacks Consensus Estimate by 17.4%.
Expenses increased 10.8% to $285.3 million because of higher compensation, operating cost and reimbursements.
Corporate: EBITDAC was negative $57.2 million compared with negative $32.4 million in the year-ago quarter.
Financial Update
As of Mar 31, 2023, total assets were $45,094.4 million, up from $38,358.4 million at 2022-end.
As of Mar 31, 2023, cash and cash equivalents increased to $1,549.9 million from $842.3 million at 2022-end.
Shareholders’ equity increased 7.3% from Dec 31, 2022, to $9,858.3 million as of Mar 31, 2023.
Acquisition Update
In the quarter, the company closed 10 acquisitions with estimated annualized revenues of $69 million.
2023 Guidance
Management of AJG expects organic growth in the brokerage segment to be between 7% and 9% in 2023, the mid-point of which indicates a deterioration of 17.5% from the 2022 figure of 9.7%.
Adjusted EBITDAC margin are expected to rise between 60 and 80 bps in 2023, the mid-point of which indicates a 30% decrease from the 2022 rise of 100 bps.
Organic growth in the Risk Management segment is expected to be between 12% and 13% in 2023, the mid-point of which indicates a 6% fall from the 2022 figure of 13.3%.
Adjusted EBITDAC margin in the Risk Management segment is expected to rise more than 19% for 2023, indicating a 2.7% rise from the 2022 figure of 18.5%.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #4 (Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurance-Brokerage Players
Marsh & McLennan Companies, Inc. (MMC - Free Report) reported first-quarter 2023 adjusted earnings per share of $2.53, which outpaced the Zacks Consensus Estimate of $2.45 by 3.3%. The bottom line advanced 10% year over year.
Consolidated revenues of MMC amounted to $5,924 million, which rose 7% year over year. The figure improved 9% on an underlying basis. The top line beat the consensus mark by 1.3%.
Willis Towers Watson Public Limited Company (WTW - Free Report) delivered first-quarter 2023 adjusted earnings of $2.84 per share, which beat the Zacks Consensus Estimate by 1.1%. The bottom line improved 6.8% year over year.
The solid performance of WTW’s Health, Wealth & Career segment and lower expenses were offset by the soft performance of the Risk & Broking segment.
Brown & Brown, Inc.’s (BRO - Free Report) first-quarter 2023 adjusted earnings of 84 cents per share beat the Zacks Consensus Estimate by 3.7%. The bottom line increased 13.5% year over year.
The quarterly results reflected improved organic growth and higher net investment income, partly offset by higher expenses.