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Arthur J. Gallagher (AJG) Up 14% YTD: Will the Bull Run Last?
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Arthur J. Gallagher’s (AJG - Free Report) shares have gained 13.5% year to date, outperforming the industry’s increase of 8.7%. The Finance sector decreased 3.6%, while the Zacks S&P 500 composite has gained 15.6% in the same period. With a market capitalization of $46 billion, the average volume of shares traded in the last three months was 0.9 million.
Solid performance of the Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment continue to drive this Zacks Rank #3 (Hold) insurer’s performance.
Earnings of AJG increased 19.9% over the last five years, better than the industry average of 12.6%. The company has a stellar record of beating estimates for the last 19 quarters.
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2023 earnings is pegged at $8.71, indicating an increase of 12.5% on 16% higher revenues of $9.8 billion. The consensus estimate for 2024 earnings is pegged at $9.80, indicating an increase of 12.5% on 9.5% higher revenues of $10.7 billion.
The long-term earnings growth rate is currently pegged at 10.9%, better than the industry average of 10.4%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 12.2%. AJG has a Growth Score of B.
Banking on a sturdy organic outlook, margin expansion opportunities and an impressive M&A pipeline, AJG expects to deliver a solid performance in 2023.
AJG is the largest property/casualty third-party claims administrator and the fourth-largest insurance broker globally based on revenues. A sustained solid operational performance at its Brokerage and Risk Management segments should continue to drive its top line. We estimate the top line to increase at a three-year (2022-2025) CAGR of 11.8%.
Arthur J. Gallagher expects organic growth in the Brokerage segment between 7% and 9% in 2023 and between 12% and 13% at Risk Management. While we project revenues at Brokerage to increase at a three-year (2022-2025) CAGR of 16%, Risk Management revenues are expected to be up 7.9% over the same time frame.
AJG has an impressive inorganic growth story. The insurance broker has quite a strong pipeline with about $350 million of revenues, associated with almost 40 term sheets, either agreed upon or being prepared. AJG estimates M&A capacity of more than $3 billion through 2023.
AJG estimates the adjusted EBITDAC margin at Brokerage to expand between 60 and 80 bps in 2023 and increase more than 19% at Risk Management. Though we expect a 7.7% rise in 2023, the adjusted net margin is projected to expand 30 basis points.
Banking on its operational excellence, AJG engages in effective capital deployment. It increased dividends at a three-year CAGR (2020-2023) of 5.1%, with dividends currently yielding 1.1%, almost in line with the industry average. AJG also has $1.5 billion share buyback authorization remaining.
The Zacks Consensus Estimate for Aon’s 2023 and 2024 earnings indicates a respective 7.5% and 12% year-over-year increase. AON delivered a four-quarter average earnings surprise of 1.64%. Shares have risen 12.4% year to date.
The Zacks Consensus Estimate for BRO’s 2023 and 2024 EPS indicates a respective 10.5% and 9.2% increase year over year. BRO delivered a four-quarter average earnings surprise of 1.19%. Shares have risen 20.2% year to date.
The Zacks Consensus Estimate for Marsh & McLennan’s 2023 and 2024 EPS indicates a respective 10.9% and 9.1% increase year over year. MMC delivered a four-quarter average earnings surprise of 2.90%. Shares have risen 11.8% year to date.
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Arthur J. Gallagher (AJG) Up 14% YTD: Will the Bull Run Last?
Arthur J. Gallagher’s (AJG - Free Report) shares have gained 13.5% year to date, outperforming the industry’s increase of 8.7%. The Finance sector decreased 3.6%, while the Zacks S&P 500 composite has gained 15.6% in the same period. With a market capitalization of $46 billion, the average volume of shares traded in the last three months was 0.9 million.
Solid performance of the Brokerage and Risk Management segments, strategic buyouts to capitalize on growing market opportunities and effective capital deployment continue to drive this Zacks Rank #3 (Hold) insurer’s performance.
Earnings of AJG increased 19.9% over the last five years, better than the industry average of 12.6%. The company has a stellar record of beating estimates for the last 19 quarters.
AJG has a VGM Score of B.
Image Source: Zacks Investment Research
Can It Retain the Momentum?
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2023 earnings is pegged at $8.71, indicating an increase of 12.5% on 16% higher revenues of $9.8 billion. The consensus estimate for 2024 earnings is pegged at $9.80, indicating an increase of 12.5% on 9.5% higher revenues of $10.7 billion.
The long-term earnings growth rate is currently pegged at 10.9%, better than the industry average of 10.4%. We estimate the bottom line to increase at a three-year (2022-2025) CAGR of 12.2%. AJG has a Growth Score of B.
Banking on a sturdy organic outlook, margin expansion opportunities and an impressive M&A pipeline, AJG expects to deliver a solid performance in 2023.
AJG is the largest property/casualty third-party claims administrator and the fourth-largest insurance broker globally based on revenues. A sustained solid operational performance at its Brokerage and Risk Management segments should continue to drive its top line. We estimate the top line to increase at a three-year (2022-2025) CAGR of 11.8%.
Arthur J. Gallagher expects organic growth in the Brokerage segment between 7% and 9% in 2023 and between 12% and 13% at Risk Management. While we project revenues at Brokerage to increase at a three-year (2022-2025) CAGR of 16%, Risk Management revenues are expected to be up 7.9% over the same time frame.
AJG has an impressive inorganic growth story. The insurance broker has quite a strong pipeline with about $350 million of revenues, associated with almost 40 term sheets, either agreed upon or being prepared. AJG estimates M&A capacity of more than $3 billion through 2023.
AJG estimates the adjusted EBITDAC margin at Brokerage to expand between 60 and 80 bps in 2023 and increase more than 19% at Risk Management. Though we expect a 7.7% rise in 2023, the adjusted net margin is projected to expand 30 basis points.
Banking on its operational excellence, AJG engages in effective capital deployment. It increased dividends at a three-year CAGR (2020-2023) of 5.1%, with dividends currently yielding 1.1%, almost in line with the industry average. AJG also has $1.5 billion share buyback authorization remaining.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Aon (AON - Free Report) , Brown and Brown (BRO - Free Report) and Marsh & McLennan Companies (MMC - Free Report) , each carrying Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Aon’s 2023 and 2024 earnings indicates a respective 7.5% and 12% year-over-year increase. AON delivered a four-quarter average earnings surprise of 1.64%. Shares have risen 12.4% year to date.
The Zacks Consensus Estimate for BRO’s 2023 and 2024 EPS indicates a respective 10.5% and 9.2% increase year over year. BRO delivered a four-quarter average earnings surprise of 1.19%. Shares have risen 20.2% year to date.
The Zacks Consensus Estimate for Marsh & McLennan’s 2023 and 2024 EPS indicates a respective 10.9% and 9.1% increase year over year. MMC delivered a four-quarter average earnings surprise of 2.90%. Shares have risen 11.8% year to date.