Acquisitions Continue to Support AJG

Zacks

Shares of Arthur J Gallagher & Co. (AJG) continue to gain riding on the strength of its impressive inorganic growth story. Shares have gained almost 36% year-to-date. The insurance broker announced yet another acquisition recently.

Arthur J. Gallagher & Co. acquired Springfield, Missouri-based employee benefit brokerage and consulting services provider, Jenkins and Associates for an undisclosed amount. This acquisition takes AJG’s quarter-to-date takeover tally to 11, which compares favorably with eight acquisitions (with annualized revenues totaling $135.5 million) closed in the preceding quarter. On the other hand, the month’s count hits a grand six.

The company’s strong financial position continues to support its series of acquisitions.

The abovementioned acquisition complements AJG’s employee benefits operations as Jenkins and Associates provides group medical, dental, life, voluntary benefits, disability, wellness and long-term care insurance products. In addition, the deal will enhance the acquirer’s presence in the Midwest.

Arthur J. Gallagher & Co. continuously undertakes acquisitions to augment its product and service offerings as well as leverage its international footprint. These initiatives should aid the company’s earnings performance going forward. The Zacks Consensus Estimate for 2014 stands at $2.52, up 17.9% year over year.

We expect Arthur J. Gallagher & Co.’s compelling inorganic growth story to influence analysts to raise their estimates, which in turn will exert upward pressure on its Zacks Rank. Arthur J. Gallagher & Co. presently carries a Zacks Rank #3 (Hold).

With respect to earnings performance, AJG delivered positive surprises in 3 of the last 4 quarters with an average beat of almost 9.2%. The Zacks Consensus Estimate for fourth quarter and full year 2013 is currently pegged at 49 cents and $2.14, respectively. These estimates also translate into a year-over-year upside of 23.4% and 17.9%, respectively.

Among other insurance brokers, Brown & Brown of Kentucky Inc., a subsidiary of Brown & Brown Inc. (BRO), has agreed to acquire selected assets of O'Neil Financial Services, Agency Services Consolidated Inc. as well as certain assets of Preserve Extended Protection Plan Inc. Marsh & McLennan Agency LLC, a subsidiary of insurance broker Marsh & McLennan Companies Inc., (MMC) also announced the acquisition of Cambridge Property & Casualty, one of the largest property/casualty insurance agencies in Michigan.

A better-ranked insurance broker Validus Holdings, Ltd. (VR) with Zacks Rank #1 (Strong Buy) is also worth considering.

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Read the Full Research Report on BRO
Read the Full Research Report on VR


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