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Why You Should Stay Invested in Arthur J. Gallagher (AJG) Stock
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Arthur J. Gallagher & Co. (AJG - Free Report) is well-poised for growth, given well performing Brokerage and Risk Management segments, strategic buyouts, effective capital deployment and improved guidance.
Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $7.71, indicating a 41.2% increase from the year-ago reported figure on 3.5% higher revenues of $8.4 billion. The consensus estimate for 2023 earnings stands at $8.59, indicating 10.9% increase from the year-ago reported figure on 11.5% higher revenues of $9.4 billion.
Earnings Surprise History
AJG has a stellar track record of beating estimates in the last seven quarters.
Zacks Rank
Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 11.4% against the industry’s decrease of 7%.
Image Source: Zacks Investment Research
Business Tailwinds
The insurer’s top line should continue to benefit from a sustained solid operational performance at its Brokerage and Risk Management segments.
Higher commissions from underwriting enterprises, higher fees from clients, improved supplemental and contingent revenues from brokerage operations and higher organic revenues are likely to drive the performance of both segments.
Arthur J. Gallagher boasts an impressive inorganic story. AJG’s merger and acquisition pipeline is quite strong with about $400 million of annualized revenues and associated with about 50 term sheets either agreed upon or being prepared.
Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. A solid capital position supports AJG in its growth initiatives and it, thus, remains focused on continuing its tuck-in mergers and acquisitions. The insurer expects M&A capacity at more than $4 billion through the end of 2023.
AJG expects EBITDAC margin to remain between 18.5% and 19%. In Brokerage, the insurance broker expects an adjusted EBITDAC margin of 34%, while at Risk Management, the adjusted EBITDAC margin is expected to be about 18.5%. AJG expects fourth-quarter margin expansion at Brokerage of 125 basis points and targets around 10 to 20 basis points of margin expansion in 2022. For 2023, AJG expects margin expansion starting around 4% or 50 basis points at 6%.
By virtue of solid operational performance, AJG 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 (2016-2022) of 3.8% with dividends currently yielding 1.1%. AJG also has a $1 billion share buyback program under its authorization.
Allianz’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 12.96%. In the past year, the insurer has lost 9%.
The Zacks Consensus Estimate for ALIZY’s 2022 and 2023 earnings has moved 0.6% and 0.8% north, respectively, in the past 30 days.
The Zacks Consensus Estimate for James River’s 2022 earnings has moved 0.6% north in the past 60 days. In the past year, JRVR has lost 26.3%.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings implies a respective year-over-year rise of 134.2% and 13.9%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.10%.
The Zacks Consensus Estimate for RDN’s 2022 earnings has moved 12.7% north in the past 60 days. In the past year, the insurer has lost 11%.
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Why You Should Stay Invested in Arthur J. Gallagher (AJG) Stock
Arthur J. Gallagher & Co. (AJG - Free Report) is well-poised for growth, given well performing Brokerage and Risk Management segments, strategic buyouts, effective capital deployment and improved guidance.
Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2022 earnings is pegged at $7.71, indicating a 41.2% increase from the year-ago reported figure on 3.5% higher revenues of $8.4 billion. The consensus estimate for 2023 earnings stands at $8.59, indicating 10.9% increase from the year-ago reported figure on 11.5% higher revenues of $9.4 billion.
Earnings Surprise History
AJG has a stellar track record of beating estimates in the last seven quarters.
Zacks Rank
Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 11.4% against the industry’s decrease of 7%.
Image Source: Zacks Investment Research
Business Tailwinds
The insurer’s top line should continue to benefit from a sustained solid operational performance at its Brokerage and Risk Management segments.
Higher commissions from underwriting enterprises, higher fees from clients, improved supplemental and contingent revenues from brokerage operations and higher organic revenues are likely to drive the performance of both segments.
Arthur J. Gallagher boasts an impressive inorganic story. AJG’s merger and acquisition pipeline is quite strong with about $400 million of annualized revenues and associated with about 50 term sheets either agreed upon or being prepared.
Arthur J. Gallagher’s revenues are geographically diversified with strong domestic and international operations and a compelling product and service portfolio. A solid capital position supports AJG in its growth initiatives and it, thus, remains focused on continuing its tuck-in mergers and acquisitions. The insurer expects M&A capacity at more than $4 billion through the end of 2023.
AJG expects EBITDAC margin to remain between 18.5% and 19%. In Brokerage, the insurance broker expects an adjusted EBITDAC margin of 34%, while at Risk Management, the adjusted EBITDAC margin is expected to be about 18.5%. AJG expects fourth-quarter margin expansion at Brokerage of 125 basis points and targets around 10 to 20 basis points of margin expansion in 2022. For 2023, AJG expects margin expansion starting around 4% or 50 basis points at 6%.
By virtue of solid operational performance, AJG 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 (2016-2022) of 3.8% with dividends currently yielding 1.1%. AJG also has a $1 billion share buyback program under its authorization.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Allianz SE (ALIZY - Free Report) , James River Group Holdings, Ltd. (JRVR - Free Report) and Radian Group Inc. (RDN - Free Report) . While Allianz sports a Zacks Rank #1 (Strong Buy), James River and Radian carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Allianz’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 12.96%. In the past year, the insurer has lost 9%.
The Zacks Consensus Estimate for ALIZY’s 2022 and 2023 earnings has moved 0.6% and 0.8% north, respectively, in the past 30 days.
The Zacks Consensus Estimate for James River’s 2022 earnings has moved 0.6% north in the past 60 days. In the past year, JRVR has lost 26.3%.
The Zacks Consensus Estimate for JRVR’s 2022 and 2023 earnings implies a respective year-over-year rise of 134.2% and 13.9%.
Radian Group’s earnings surpassed estimates in each of the last four quarters, the average earnings surprise being 45.10%.
The Zacks Consensus Estimate for RDN’s 2022 earnings has moved 12.7% north in the past 60 days. In the past year, the insurer has lost 11%.