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Here's Why Hold Strategy is Apt for Arthur J. Gallagher (AJG)
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Arthur J. Gallagher & Co.’s (AJG - Free Report) well-performing Brokerage and Risk Management segments, strategic buyouts, effective capital deployment and improved guidance make it worth retaining in one’s portfolio.
Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2023 earnings is pegged at $8.71, indicating a 12.5% increase from the year-ago reported figure on 12.4% higher revenues of $9.47 billion. The consensus estimate for 2024 earnings is $9.77, indicating a 12.1% increase from the year-ago reported figure on 10.1% higher revenues of $10.42 billion.
Earnings Surprise History
AJG has a stellar track record of beating estimates in each of the last six quarters.
Zacks Rank & Price Performance
Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 9.8% against the industry’s decline of 0.4%.
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 has an impressive inorganic story. AJG has a strong merger and acquisition pipeline with about $300 million of revenues, associated with about 45 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 $3 billion through the end of 2023.
AJG estimates organic revenue growth of about 10% and an EBITDAC margin of about 19% in 2023. In the Brokerage segment, the insurance broker estimates organic growth of 7-9% in 2023. In the Risk Management segment, AJG expects double-digit revenue growth and about 19% margin expansion in 2023. For this, it expects continued investments in analytics and tools to drive better claim outcomes and enhance client experience.
By virtue of solid operational performance, AJG expects to generate solid cash flow in 2023.
A solid capital position has enabled Arthur J. Gallagher to enhance its shareholder value. In the first quarter of 2023, the dividend increased by 7.8%, indicating a four-year CAGR (2020-2023) of 5.1%. Arthur J. Gallagher’s current dividend yield is 1.11%. Its board of directors also approved a $1.5 billion share buyback program that replaces the prior program.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , Everest Re Group, Ltd. and Selective Insurance Group, Inc. (SIGI - Free Report) . While Kinsale Capital sports a Zacks Rank #1 (Strong Buy), Everest Re and Selective Insurance carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. In the past year, KNSL has gained 37%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $9.92 and $11.94, indicating a year-over-year increase of 27.1% and 20.4%, respectively.
Everest Re beat estimates in each of the last four quarters, the average being 18.41%.
The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $45.63 and $53.28, indicating a year-over-year increase of 68.5% and 16.7%, respectively. In the past year, RE has gained 25.8%.
The Zacks Consensus Estimate for Selective Insurance’s 2023 and 2024 earnings per share is pegged at $6.57 and $7.55, indicating a year-over-year increase of 30.6% and 14.9%, respectively. In the past year, SIGI has gained 12.1%.
The Zacks Consensus Estimate for SIGI’s 2023 and 2024 revenues is pegged at $4.17 billion and $4.60 billion, indicating a year-over-year increase of 13.6% and 10.1%, respectively.
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Here's Why Hold Strategy is Apt for Arthur J. Gallagher (AJG)
Arthur J. Gallagher & Co.’s (AJG - Free Report) well-performing Brokerage and Risk Management segments, strategic buyouts, effective capital deployment and improved guidance make it worth retaining in one’s portfolio.
Growth Projections
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2023 earnings is pegged at $8.71, indicating a 12.5% increase from the year-ago reported figure on 12.4% higher revenues of $9.47 billion. The consensus estimate for 2024 earnings is $9.77, indicating a 12.1% increase from the year-ago reported figure on 10.1% higher revenues of $10.42 billion.
Earnings Surprise History
AJG has a stellar track record of beating estimates in each of the last six quarters.
Zacks Rank & Price Performance
Arthur J. Gallagher currently carries a Zacks Rank #3 (Hold). In the past year, the stock has gained 9.8% against the industry’s decline of 0.4%.
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 has an impressive inorganic story. AJG has a strong merger and acquisition pipeline with about $300 million of revenues, associated with about 45 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 $3 billion through the end of 2023.
AJG estimates organic revenue growth of about 10% and an EBITDAC margin of about 19% in 2023. In the Brokerage segment, the insurance broker estimates organic growth of 7-9% in 2023. In the Risk Management segment, AJG expects double-digit revenue growth and about 19% margin expansion in 2023. For this, it expects continued investments in analytics and tools to drive better claim outcomes and enhance client experience.
By virtue of solid operational performance, AJG expects to generate solid cash flow in 2023.
A solid capital position has enabled Arthur J. Gallagher to enhance its shareholder value. In the first quarter of 2023, the dividend increased by 7.8%, indicating a four-year CAGR (2020-2023) of 5.1%. Arthur J. Gallagher’s current dividend yield is 1.11%. Its board of directors also approved a $1.5 billion share buyback program that replaces the prior program.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Kinsale Capital Group, Inc. (KNSL - Free Report) , Everest Re Group, Ltd. and Selective Insurance Group, Inc. (SIGI - Free Report) . While Kinsale Capital sports a Zacks Rank #1 (Strong Buy), Everest Re and Selective Insurance carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinsale Capital has a solid track record of beating earnings estimates in each of the last four quarters, the average being 13.83%. In the past year, KNSL has gained 37%.
The Zacks Consensus Estimate for KNSL’s 2023 and 2024 earnings per share is pegged at $9.92 and $11.94, indicating a year-over-year increase of 27.1% and 20.4%, respectively.
Everest Re beat estimates in each of the last four quarters, the average being 18.41%.
The Zacks Consensus Estimate for RE’s 2023 and 2024 earnings per share is pegged at $45.63 and $53.28, indicating a year-over-year increase of 68.5% and 16.7%, respectively. In the past year, RE has gained 25.8%.
The Zacks Consensus Estimate for Selective Insurance’s 2023 and 2024 earnings per share is pegged at $6.57 and $7.55, indicating a year-over-year increase of 30.6% and 14.9%, respectively. In the past year, SIGI has gained 12.1%.
The Zacks Consensus Estimate for SIGI’s 2023 and 2024 revenues is pegged at $4.17 billion and $4.60 billion, indicating a year-over-year increase of 13.6% and 10.1%, respectively.