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Arthur J. Gallagher (AJG): What's Up this Earnings Season?
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Arthur J. Gallagher & Co. (AJG - Free Report) is slated to report fourth-quarter 2016 results on Jan 26, after the market closes. Last quarter, the company posted a positive earnings surprise of 1.32%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Arthur J. Gallagher is likely to register top-line growth in the to-be-reported quarter, fueled both by organic sales, and strategic mergers and acquisitions (M&A). Management has projected M&A revenues of $28 million in the fourth quarter.
Also, the company is likely to report organic growth in its brokerage segment, driven by stable domestic pricing environment as well as favorable pricing conditions outside the U.S.
Further, the company has likely witnessed organic growth in its employee benefit consulting operation, owing to new business opportunities. Moreover, the company’s risk management segment is anticipated to report organic growth in the to-be-reported quarter.
However, the company might have experienced an increase in expenses, primarily due to higher compensation and operating expenses, resulting in margin contraction. In addition, the company estimates integration cost of about 3 cents per share in the fourth quarter.
With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters, with an average beat of 6.26%.
Our proven model does not conclusively show that Arthur J. Gallagher is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Arthur J. Gallagher has an Earnings ESP of -1.52%. This is because the Most Accurate estimate is pegged at 65 cents, while the Zacks Consensus Estimate stands at 66 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative ESP complicates surprise prediction.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #2. The company is set to report fourth-quarter earnings on Feb 1.
Validus Holdings, Ltd. has an Earnings ESP of +5.13% and a Zacks Rank #1. The company is slated to report fourth-quarter earnings on Feb 2.
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Arthur J. Gallagher (AJG): What's Up this Earnings Season?
Arthur J. Gallagher & Co. (AJG - Free Report) is slated to report fourth-quarter 2016 results on Jan 26, after the market closes. Last quarter, the company posted a positive earnings surprise of 1.32%. Let’s see how things are shaping up for this announcement.
Factors to be Considered this Quarter
Arthur J. Gallagher is likely to register top-line growth in the to-be-reported quarter, fueled both by organic sales, and strategic mergers and acquisitions (M&A). Management has projected M&A revenues of $28 million in the fourth quarter.
Also, the company is likely to report organic growth in its brokerage segment, driven by stable domestic pricing environment as well as favorable pricing conditions outside the U.S.
Further, the company has likely witnessed organic growth in its employee benefit consulting operation, owing to new business opportunities. Moreover, the company’s risk management segment is anticipated to report organic growth in the to-be-reported quarter.
However, the company might have experienced an increase in expenses, primarily due to higher compensation and operating expenses, resulting in margin contraction. In addition, the company estimates integration cost of about 3 cents per share in the fourth quarter.
With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters, with an average beat of 6.26%.
Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. Price and EPS Surprise | Arthur J. Gallagher & Co. Quote
Earnings Whispers
Our proven model does not conclusively show that Arthur J. Gallagher is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.
Zacks ESP: Arthur J. Gallagher has an Earnings ESP of -1.52%. This is because the Most Accurate estimate is pegged at 65 cents, while the Zacks Consensus Estimate stands at 66 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative ESP complicates surprise prediction.
We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:
Chubb Limited (CB - Free Report) , which is set to report fourth-quarter earnings on Jan 31, has an Earnings ESP of +2.88% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial Group, Inc. (AFG - Free Report) has an Earnings ESP of +1.89% and a Zacks Rank #2. The company is set to report fourth-quarter earnings on Feb 1.
Validus Holdings, Ltd. has an Earnings ESP of +5.13% and a Zacks Rank #1. The company is slated to report fourth-quarter earnings on Feb 2.
Zacks' Top Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>