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Arthur J. Gallagher Bolsters Revenue Base with Adco Buyout

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Arthur J. Gallagher & Co. (AJG - Free Report) recently announced that it has completed the acquisition of Colorado-based wholesale broker and managing general agency, Adco General Corporation. The terms of the transaction were not disclosed.

Arthur J. Gallagheris well known forgrowing its revenues through strategic acquisitions and mergers. In 2015, the insurance brokercompleted 44 acquisitions with annualized revenues of $230.8 million. During the first three quarters of 2016, the company closed 28 acquisitions with annualized revenues of $97.4 million.

These deals have not only improved the company’s top line but also cemented shareholders’ confidence on the stock. In the last one year, the shares of Arthur J. Gallagher returned 40%, while the Zacks categorized Insurance Brokers industry registered increase of 33.8%.

The Adco buyout is likely to enhance Arthur J. Gallagher’s value proposition substantially.The acquired company, which offers a broad range of commercial property, liability, professional and transportation coverage to its retail broker clients across the United States, will significantly add to the acquirer’s portfolio. Adco, on the other hand, will gain a wide scale of operations along with enhanced reach and exposure across the globe through its association with Arthur J. Gallagher.

Arthur J. Gallagher offers client service capabilities in more than 150 countries around the world through its strong network of correspondent brokers and consultants. The company delivered positive earnings surprise in each of the last four quarters with an average beat of 6.26%. The Zacks Consensus Estimate for the fourth quarter is currently pegged at 66 cents, reflecting 13.8% year-over-year growth. Arthur J. Gallagher is scheduled to release its earnings on Jan 26, 2017. However, our proven model does not conclusively show that the company is likely to beat earnings estimates this time around. This is because the Zacks Rank #3 (Hold) company has an Earnings ESP of -1.52%, which complicates surprise prediction. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Stocks to Consider

Investors can also look at some better-ranked stocks from the insurance space like Radian Group Inc. (RDN - Free Report) , James River Group Holdings, Ltd. (JRVR - Free Report) and  Primerica, Inc. (PRI - Free Report) . While Radian Group sports a Zacks Rank #1 (Strong Buy), the other two hold a Zacks Rank #2 (Buy).

The Radian Group, one of the leading multi line insurers delivered positive earnings surprises in three of the last four quarters with an average beat of 5.87%.

Another renowned multi line insurer James River Group also delivered positive earnings surprises in three of the last four quarters with an average beat of 3.60%.

On the other hand, Primerica, a major life insurer posted positive surprises through out the last four consecutive quarters with an average beat of 6.37%.

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