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Arthur J Gallagher (AJG) Q2 Earnings: A Surprise in Store?

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Arthur J Gallagher & Co. (AJG - Free Report) is set to report second-quarter 2016 results on Jul 28, after the market closes. Last quarter, the company posted a positive earnings surprise of 17.24%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Arthur J Gallagher is likely to witness revenue growth in both its brokerage and risk management segments in the to-be-reported quarter, owing to robust domestic and international operations.

In addition, the company might experience improvement in the total revenue in the second quarter on the back of its several, important non-U.S. acquisitions.

However, Arthur J Gallagher’s total expenses are likely to have increased, primarily due to higher compensation and operating expenses. Further, the company might witness an increase in interest expenses, which in turn, may limit margin expansion.

With respect to surprise trend, the company delivered a positive earnings surprise in three of the last four quarters with an average beat of 8.31%.

GALLAGHER ARTHU Price and EPS Surprise

GALLAGHER ARTHU Price and EPS Surprise | GALLAGHER ARTHU Quote

Earnings Whispers

Our proven model does not conclusively show that Arthur J Gallagher is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP: Arthur J Gallagher has an Earnings ESP of 0.00%. This is because both the Most Accurate estimate and the Zacks Consensus Estimate stand at 96 cents.

Zacks Rank: Arthur J Gallagher carries a Zacks Rank #3, which increases the predictive power of ESP. However, an Earnings ESP of 0.00% makes surprise prediction difficult.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Cigna Corp. (CI - Free Report) has an Earnings ESP of +1.67% and a Zacks Rank #3. The company is set to report second-quarter earnings on Aug 4.

Manulife Financial Corporation (MFC - Free Report) has an Earnings ESP of +2.94% and a Zacks Rank #3. The company is expected to report second-quarter earnings on Aug 4.

Willis Towers Watson Public Limited Company has an Earnings ESP of +6.29% and a Zacks Rank #3. The company is slated to report second-quarter earnings on Aug 5.

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