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Arthur J. Gallagher (AJG) Q1 Earnings and Revenues Beat

Zacks Equity Research

Arthur J. Gallagher & Co. AJG reported first-quarter 2019 adjusted net earnings of $1.63 cents per share, which beat the Zacks Consensus Estimate by 1.2%. Moreover, the bottom line increased 1.5% on a year-over-year basis.

The company’s performance was driven by solid organic growth, sturdy performance across all segments and strong margin expansion.

Operational Update

Total revenues were nearly $2 billion, up 8.3% year over year. This upside was driven by higher total revenues in Brokerage and Risk Management. Also, the top line surpassed the Zacks Consensus Estimate of $1.9 billion.

Arthur J. Gallagher’s total expense rose 4.6% year over year to $1.7 billion in the reported quarter. Expenses escalated primarily due to higher compensation costs, operating costs, interest expenses, higher depreciation as well as amortization expenses.

Adjusted earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 15.5%.

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise

Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise | Arthur J. Gallagher & Co. Quote

Segment Results

Brokerage: Adjusted revenues of $1.3 billion increased 13% year over year.

Expenses increased 10.6% to $969.5 million.

Adjusted EBITDAC climbed 15% to $471.9 million while margin expanded 61 bps.

Risk Management: Adjusted revenues were up 4.1% year over year to $203.3 million, mainly owing to higher fees.

Expenses increased 2.9% to $41.4 million.

Adjusted EBITDAC increased 10% year over year to $34.5 million while margin expanded 61 bps.

Corporate: EBITDAC was negative $65.4 million, wider than $59.9 million incurred in the year- ago quarter.

Financial Update

As of Mar 31, 2019, total assets were $16.3 billion, up 14% from 2018.

Cash and cash equivalents at quarter end declined 31% from 2018 level to $1.5 billion.

Shareholders’ equity increased 8.5% from the level as of Dec 31, 2018 to $4.9 billion as of Mar 31, 2019.

Acquisition Update

In the quarter, the company closed 11 acquisitions with estimated annualized revenues of about $71.2 million.

Zacks Rank

Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported first-quarter earnings so far, The Travelers Companies, Inc. TRV, The Progressive Corporation PGR and RLI Corp. RLI beat the respective Zacks Consensus Estimate for earnings.

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