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Arthur J. Gallagher (AJG) Up 10% YTD: More Room for Upside?
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Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have gained 10.2% year to date, outperforming the industry's increase of 0.1%. The Zacks S&P 500 composite has increased 3.6% in the said time frame. With a market capitalization of $20.1 billion, average volume of shares traded in the last three months was 0.8 million.
The company continues to benefit from strategic acquisitions, higher commissions and fees, a solid capital position and prudent capital deployment.
It has a decent earnings surprise history too. Its earnings beat estimates in each of the last four quarters, the average being 11.10%.
The stock has a VGM Score of B. VGM Score helps identify stocks with the most attractive value and the most promising momentum.
Can It Retain the Rally?
The top line of the company gains from the growing contribution from its Brokerage and Risk Management segments. The brokerage segment accounted for 76% of revenues in the first half of 2020. Higher commissions from underwriting enterprises, higher fees from clients, improved supplemental and contingent revenues from brokerage operations and higher organic revenues are expected to fuel the performance of both segments going forward.
These tailwinds aided the company in maintaining a sustainable revenue growth trend over the past few years. The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $7.3 billion, indicating an increase of 7.5% from the year-ago reported figure.
The currently Zacks Rank #3 (Hold) insurance broker remains focused on acquisitions, which enable it to penetrate desirable geographic locations, extend its presence in the retail and wholesale insurance and reinsurance brokerage services markets and expand the volume of currently-provided general services. Its inorganic pipeline remains strong with revenues of about $300 million associated with 40 term sheets, either agreed upon or being prepared.
In the first half of 2020, the company completed 12 mergers, representing $138.1 million of annualized revenues. Presently, in the ongoing quarter, it completed four acquisitions. Its strong liquidity position supports Arthur J. Gallagher in its strategic initiatives. The company targets $1.5-$1.6 billion of mergers and acquisitions with free cash and debt. It expects to use its earnings-generated additional cash flow to continue with its M&A strategy in brokerage and risk management operations.
Arthur J. Gallagher boasts a strong balance sheet with significant financial flexibility having more than $1.3 billion of liquidity, consisting of available cash on hand of nearly $275 million. Also, it has access to more than $1 billion under its revolving credit facility. Moreover, its total debt to total capital of 43.8% compares favorably with the industry average of 53.5%.
Robust cash flows enable Arthur J. Gallagher to undertake shareholder-friendly activities via dividend hikes and share buybacks. The company’s dividend witnesses a six-year (2014-2020) CAGR of 3.8%. Its dividend payout yield of 1.7% betters the industry average of 1.3%. Investors should be impressed by the company’s record of nine straight-year dividend hikes, which make the stock an attractive pick for yield-seeking investors. It has 7.3 million shares remaining under its repurchase authorization.
The Zacks Consensus Estimate for 2020 and 2021 earnings indicates an 18.3% and 4.4% increase each from the respective year-ago reported numbers. The expected long-term earnings growth is pegged at 8.4%. The stock carries an impressive Growth Score of A. Notably, Growth Score analyzes a company’s prospects.
Earnings of Donegal surpassed estimates in each of the last four quarters, the average being 86.44%.
Fidelity National’s bottom line surpassed estimates in each of the last four quarters, the average being 32.13%.
Earnings of Markel surpassed estimates in three of the last four quarters (missed the mark in the remaining quarter), the average surprise being 50.01% .
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Arthur J. Gallagher (AJG) Up 10% YTD: More Room for Upside?
Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have gained 10.2% year to date, outperforming the industry's increase of 0.1%. The Zacks S&P 500 composite has increased 3.6% in the said time frame. With a market capitalization of $20.1 billion, average volume of shares traded in the last three months was 0.8 million.
The company continues to benefit from strategic acquisitions, higher commissions and fees, a solid capital position and prudent capital deployment.
It has a decent earnings surprise history too. Its earnings beat estimates in each of the last four quarters, the average being 11.10%.
The stock has a VGM Score of B. VGM Score helps identify stocks with the most attractive value and the most promising momentum.
Can It Retain the Rally?
The top line of the company gains from the growing contribution from its Brokerage and Risk Management segments. The brokerage segment accounted for 76% of revenues in the first half of 2020. Higher commissions from underwriting enterprises, higher fees from clients, improved supplemental and contingent revenues from brokerage operations and higher organic revenues are expected to fuel the performance of both segments going forward.
These tailwinds aided the company in maintaining a sustainable revenue growth trend over the past few years. The Zacks Consensus Estimate for the company’s 2021 revenues is pegged at $7.3 billion, indicating an increase of 7.5% from the year-ago reported figure.
The currently Zacks Rank #3 (Hold) insurance broker remains focused on acquisitions, which enable it to penetrate desirable geographic locations, extend its presence in the retail and wholesale insurance and reinsurance brokerage services markets and expand the volume of currently-provided general services. Its inorganic pipeline remains strong with revenues of about $300 million associated with 40 term sheets, either agreed upon or being prepared.
In the first half of 2020, the company completed 12 mergers, representing $138.1 million of annualized revenues. Presently, in the ongoing quarter, it completed four acquisitions. Its strong liquidity position supports Arthur J. Gallagher in its strategic initiatives. The company targets $1.5-$1.6 billion of mergers and acquisitions with free cash and debt. It expects to use its earnings-generated additional cash flow to continue with its M&A strategy in brokerage and risk management operations.
Arthur J. Gallagher boasts a strong balance sheet with significant financial flexibility having more than $1.3 billion of liquidity, consisting of available cash on hand of nearly $275 million. Also, it has access to more than $1 billion under its revolving credit facility. Moreover, its total debt to total capital of 43.8% compares favorably with the industry average of 53.5%.
Robust cash flows enable Arthur J. Gallagher to undertake shareholder-friendly activities via dividend hikes and share buybacks. The company’s dividend witnesses a six-year (2014-2020) CAGR of 3.8%. Its dividend payout yield of 1.7% betters the industry average of 1.3%. Investors should be impressed by the company’s record of nine straight-year dividend hikes, which make the stock an attractive pick for yield-seeking investors. It has 7.3 million shares remaining under its repurchase authorization.
The Zacks Consensus Estimate for 2020 and 2021 earnings indicates an 18.3% and 4.4% increase each from the respective year-ago reported numbers. The expected long-term earnings growth is pegged at 8.4%. The stock carries an impressive Growth Score of A. Notably, Growth Score analyzes a company’s prospects.
Stocks to Consider
Some better-ranked stocks in the property and casualty space are Donegal Group Incorporation (DGICA - Free Report) , Fidelity National Financial Inc., (FNF - Free Report) and Markel Corporation (MKL - Free Report) , each presently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings of Donegal surpassed estimates in each of the last four quarters, the average being 86.44%.
Fidelity National’s bottom line surpassed estimates in each of the last four quarters, the average being 32.13%.
Earnings of Markel surpassed estimates in three of the last four quarters (missed the mark in the remaining quarter), the average surprise being 50.01% .
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>