Arthur J. Gallagher (AJG) Q1 Earnings: What's in Store?
Arthur J. Gallagher & Co. AJG is slated to report first-quarter 2018 results on May 1 after the market closes. In the fourth-quarter 2017, the company delivered a positive earnings surprise of 9.33%.
Let’s see, how things are shaping up for this announcement.
Arthur J. Gallagher is likely to report top-line growth in the soon-to-be-reported quarter, mainly driven by organic sales as well as strategic mergers and acquisitions. Also, expected revenue improvement across the segments of Brokerage, Risk Management and Corporate is likely to contribute to this upside. The Zacks Consensus Estimate for revenues is also pegged higher at $1.5 billion, representing a rise of 16.8% from the prior-year quarter.
Additionally, the company anticipates improved organic growth at its Brokerage segment in the period to be reported. To top it all, the company estimates that the segmental revenues will be benefitted from a favorable forex impact.
Notably, the tax cut, which slashed the tax rate to 21% from 35%, is likely to aid the companies’ bottom line, boosting margins directly. The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at $1.51 per share, reflecting an increase of a whopping 277.5% from the prior-year period. Continued share buybacks should have boosted the metric.
Employee benefit consulting operations are estimated to have registered organic growth on new business opportunities.
However, the insurance broker is likely to witness a noticeable rise in expenses, primarily due to higher compensation and operating expenses. The downside can limit the operating margin expansion, hurting the company’s overall performance in turn.
Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. Price and EPS Surprise | Arthur J. Gallagher & Co. Quote
What Our Quantitative Model States
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 favorable Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. But 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 $1.51. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company’s ESP of 0.00% makes surprise prediction difficult.
We caution against the Sell-rated stocks (#4 or 5) going into an earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Some stocks worth considering from the insurance industry with the right combination of elements to surpass estimates this time around are as follows:
The Allstate Corporation ALL is set to report first-quarter earnings on May 1. The stock has an Earnings ESP of +4.24% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial Group, Inc. AFG has an Earnings ESP of +4.46% and a Zacks Rank #2. The company is slated to release first-quarter earnings on May 2.
Cigna Corporation CI has an Earnings ESP of +0.62% and is a Zacks #3 Ranked player. The company is slated to release first-quarter earnings on May 3.
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