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Arthur J. Gallagher (AJG) Up 17% in a Year: More Room to Run?
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Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 17.3% in a year against the industry’s decrease of 5.1% as well as the Finance sector’s and the Zacks S&P 500 composite’s decline of 13.4% and 12.7%, respectively in the same time frame. With a market capitalization of $34.6 billion, the average volume of shares traded in the last three months was about 1 million.
Image Source: Zacks Investment Research
Strong performing Brokerage and Risk Management segments, strategic buyouts to capitalize on growing markets opportunities, effective capital deployment and upbeat guidance continue to drive this insurance broker.
AJG has a stellar track record of beating estimates in the last 14 quarters.
Can AJG Retain the Momentum?
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $7.77, indicating an increase of 41.8% on 5.3% higher revenues of $8.5 billion. The consensus estimate for 2023 earnings is pegged at $8.68, indicating an increase of 11.7% on 10.8% higher revenues of $9.5 billion.
The long-term earnings growth rate is currently pegged at 9.7%. AJG has a Growth Score of B. This style score analyzes the growth prospects of a company.
This Zacks Rank #3 (Hold) company is the largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues. Continued growing contribution from its Brokerage and Risk Management segments should fuel revenues.
Continued revenue improvement and the company’s focus on lowering costs are likely to favor margins. Full-year 2022 EBITDAC margin is expected to remain close to 19%. In Brokerage, the insurance broker is poised to deliver around 10 to 20 basis points of full-year adjusted margin expansion.
AJG boasts an impressive inorganic growth story. The insurance broker closed 13 buyouts year to date and has a quite strong pipeline with about $250 million of revenues, associated with about 40 term sheets either agreed upon or being prepared. Arthur J. Gallagher estimates M&A capacity at more than $4 billion through the end of 2023.
Strong operational performance has been driving Arthur J. Gallagher’s cash flows. It expects to generate $125 million to $150 million in cash flow in 2022 and more in 2023.
Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a seven-year CAGR (2015-2021) of 3.8%, with dividends currently yielding 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors. AJG also has a $1.5 billion share buyback program under its authorization.
AJG has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
Stocks to Consider
Some better-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , American International Group, Inc. (AIG - Free Report) and MGIC Investment Corporation (MTG - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), American International and MGIC Investment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 32.1%.
American International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 18.9%. In the past year, AIG stock has rallied 8.3%.
The Zacks Consensus Estimate for American International’s 2022 and 2023 earnings implies 1.2% and 21.2% year-over-year growth, respectively.
MGIC Investment’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.9%. In the past year, MTG has declined 8.9%.
The Zacks Consensus Estimate for MTG’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 60 days.
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Arthur J. Gallagher (AJG) Up 17% in a Year: More Room to Run?
Shares of Arthur J. Gallagher & Co. (AJG - Free Report) have rallied 17.3% in a year against the industry’s decrease of 5.1% as well as the Finance sector’s and the Zacks S&P 500 composite’s decline of 13.4% and 12.7%, respectively in the same time frame. With a market capitalization of $34.6 billion, the average volume of shares traded in the last three months was about 1 million.
Image Source: Zacks Investment Research
Strong performing Brokerage and Risk Management segments, strategic buyouts to capitalize on growing markets opportunities, effective capital deployment and upbeat guidance continue to drive this insurance broker.
AJG has a stellar track record of beating estimates in the last 14 quarters.
Can AJG Retain the Momentum?
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $7.77, indicating an increase of 41.8% on 5.3% higher revenues of $8.5 billion. The consensus estimate for 2023 earnings is pegged at $8.68, indicating an increase of 11.7% on 10.8% higher revenues of $9.5 billion.
The long-term earnings growth rate is currently pegged at 9.7%. AJG has a Growth Score of B. This style score analyzes the growth prospects of a company.
This Zacks Rank #3 (Hold) company is the largest property/casualty third-party claims administrator and the fourth largest globally among insurance brokers based on revenues. Continued growing contribution from its Brokerage and Risk Management segments should fuel revenues.
Continued revenue improvement and the company’s focus on lowering costs are likely to favor margins. Full-year 2022 EBITDAC margin is expected to remain close to 19%. In Brokerage, the insurance broker is poised to deliver around 10 to 20 basis points of full-year adjusted margin expansion.
AJG boasts an impressive inorganic growth story. The insurance broker closed 13 buyouts year to date and has a quite strong pipeline with about $250 million of revenues, associated with about 40 term sheets either agreed upon or being prepared. Arthur J. Gallagher estimates M&A capacity at more than $4 billion through the end of 2023.
Strong operational performance has been driving Arthur J. Gallagher’s cash flows. It expects to generate $125 million to $150 million in cash flow in 2022 and more in 2023.
Banking on stable cash flow, Arthur J. Gallagher has increased dividends at a seven-year CAGR (2015-2021) of 3.8%, with dividends currently yielding 1.2%, better than the industry average of 1.1%, making the stock an attractive pick for yield-seeking investors. AJG also has a $1.5 billion share buyback program under its authorization.
AJG has a VGM Score of B. This helps to identify stocks with the most attractive value, growth and momentum.
Stocks to Consider
Some better-ranked stocks from the multi-line insurance industry are James River Group Holdings, Ltd. (JRVR - Free Report) , American International Group, Inc. (AIG - Free Report) and MGIC Investment Corporation (MTG - Free Report) . While James River Group sports a Zacks Rank #1 (Strong Buy), American International and MGIC Investment carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for James River Group’s 2022 and 2023 earnings implies 136% and 13.1% year-over-year growth, respectively.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings has moved 15.1% and 4.9% north, respectively, in the past 60 days. In the past year, the insurer has declined 32.1%.
American International’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 18.9%. In the past year, AIG stock has rallied 8.3%.
The Zacks Consensus Estimate for American International’s 2022 and 2023 earnings implies 1.2% and 21.2% year-over-year growth, respectively.
MGIC Investment’s earnings surpassed estimates in each of the last four quarters, the average beat being 10.9%. In the past year, MTG has declined 8.9%.
The Zacks Consensus Estimate for MTG’s 2022 and 2023 earnings has moved 1.8% and 3.2% north, respectively, in the past 60 days.