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What Awaits Arthur J. Gallagher (AJG) This Earnings Season?

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Arthur J. Gallagher & Co. (AJG - Free Report) is slated to report second-quarter 2021 results on Jul 29, after market close. The company delivered an earnings surprise in each of the last four quarters, the average being 18.81%.

Factors to Consider

Arthur J. Gallagher’s second-quarter results are expected to reflect lower interest income from U.S. operations, higher new claims, and higher property and casualty rates.

Fees and commissions in the to-be-reported quarter are likely to have benefited from revenues associated with acquisitions and organic change in base commissions and fee revenues. The Zacks Consensus Estimate for fees is pegged at $507 million. The consensus mark for commissions stands at $928 million, implying 12.1% growth from the prior-year period’s reported number.

The company expects a modest increase in covered lives, consulting engagements and special project work in the to-be-reported results.

Arthur J. Gallagher expects to witness substantial increase in the new claims in the quarter to be reported.

Decreases in interest income from U.S. operations due to decreases in interest rates earned on client held funds are likely to have affected the company’s net investment income in the to-be-reported quarter.

Organic commission, fee, supplemental revenues, contingent revenues as well as strategic mergers and acquisitions are likely to have driven the top line in the to-be-reported quarter.

Organic revenues are likely to have improved in the Brokerage and Risk Management segment in the to-be-reported quarter.

Arthur J. Gallagher expects to lower expense by $65 million to $70 million per quarter.

In property and casualty brokerage operations, the company expects to see higher property and casualty premium rates and exposure units.

In the Brokerage segment and Risk Management segment, the company is likely to have witnessed strong EBITDAC growth owing to cost savings initiatives in the second quarter.

The Zacks Consensus Estimate for second-quarter earnings per share stands at $1.10 per share, indicating an increase of 17% from the year-ago quarter’s reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Arthur J. Gallagher this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that’s not the case here.

Earnings ESP: Arthur J. Gallagher has an Earnings ESP of -2.98%. This is because the Most Accurate Estimate of $1.07 is pegged lower than the Zacks Consensus Estimate of $1.10. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. price-eps-surprise | Arthur J. Gallagher & Co. Quote

Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3, currently. 

Stocks to Consider  

Some stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Aon plc (AON - Free Report) has an Earnings ESP of +2.91% and a Zacks Rank of 3, currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Marsh & McLennan Companies, Inc. (MMC - Free Report) has an Earnings ESP of +2.85% and is Zacks #3 Ranked, presently.

Voya Financial, Inc. (VOYA - Free Report) has an Earnings ESP of +1.13% and is a #3 Ranked player, currently.