Arthur J. Gallagher (AJG) Q3 Earnings: What's in Store?
Arthur J. Gallagher & Co. AJG is slated to report third-quarter 2018 results on Oct 25 after the market closes. Last reported quarter, the company’s earnings met expectations.
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 probable upside. The Zacks Consensus Estimate for the revenues is pegged at $1.7 billion, representing a 6.6% rise from the prior-year quarter.
Additionally, we anticipate the company to have displayed improved organic growth at its Brokerage segment in the period to be reported, driven by strong growth across all divisions. To top it all, the company estimates revenues from this segment to be benefited from a favorable forex impact. In fact, the Zacks Consensus Estimate for this metric is pegged at $1 billion, reflecting an 8.5% increase from the year-ago quarter.
With respect to Risk Management segment, the company might have experienced organic growth and a better margin in the to-be-reported quarter, mainly driven by a diversified product portfolio coupled with a few specialty mergers already in the company’s pipeline. The Zacks Consensus Estimate for this metric is pegged at $217 million, indicating 8.4% growth from the year-ago period.
On the back of a better interest rate environment, the company is likely to witness higher investment results with the consensus mark pegged at $16.3 million, translating into an improvement of 5.4% on a year-over-year basis.
Also, we expect employee benefit consulting operations to have registered organic growth on new business opportunities.
However, the insurance broker is likely to incur a noticeable increase 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.
The Zacks Consensus Estimate for earnings in the to-be-reported quarter is pegged at 77 cents per share, depicting a considerable decline of 4.9% from the prior-year period.
What Our Quantitative Model States
Our proven model does not conclusively show that Arthur J. Gallagher is likely to beat on earnings this to-be-reported period. 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.
Earnings ESP: Arthur J. Gallagher has an Earnings ESP of -0.35%. This is because the Most Accurate Estimate is pegged at 76 cents per share, lower than the Zacks Consensus Estimate of 77 cents. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.
Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. Price and EPS Surprise | Arthur J. Gallagher & Co. Quote
Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3, which increases the predictive power of ESP. However, the company needs to have a positive ESP to be confident about an earnings surprise. Therefore, this combination leaves surprise prediction inconclusive.
We caution against 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:
Everest Re Group, Ltd. RE is set to report third-quarter earnings on Oct 29 and has an Earnings ESP of +16.13%. The company is a Zacks #3 Ranked player. You can see the complete list of today’s Zacks #1 Rank stocks here.
Voya Financial, Inc. VOYA has an Earnings ESP of +0.93% and a Zacks Rank #2. The company is set to announce third-quarter earnings on Oct 30.
Willis Towers Watson Public Limited Company WLTW has an Earnings ESP of +2.40% and a Zacks Rank of 3. The company is set to release third-quarter earnings on Nov 2.
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