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Arthur J. Gallagher & Co. (NYSE:AJG) Just Released Its Annual Results And Analysts Are Updating Their Estimates

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Simply Wall St
·4 min read
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Arthur J. Gallagher & Co. (NYSE:AJG) shareholders are probably feeling a little disappointed, since its shares fell 2.1% to US$115 in the week after its latest full-year results. Results overall were respectable, with statutory earnings of US$4.20 per share roughly in line with what the analysts had forecast. Revenues of US$6.8b came in 2.2% ahead of analyst predictions. This is an important time for investors, as they can track a company's performance in its report, look at what experts are forecasting for next year, and see if there has been any change to expectations for the business. So we gathered the latest post-earnings forecasts to see what estimates suggest is in store for next year.

View our latest analysis for Arthur J. Gallagher

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Following the latest results, Arthur J. Gallagher's eleven analysts are now forecasting revenues of US$7.12b in 2021. This would be a modest 5.0% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to grow 13% to US$4.84. In the lead-up to this report, the analysts had been modelling revenues of US$7.09b and earnings per share (EPS) of US$4.54 in 2021. So the consensus seems to have become somewhat more optimistic on Arthur J. Gallagher's earnings potential following these results.

There's been no major changes to the consensus price target of US$134, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Arthur J. Gallagher, with the most bullish analyst valuing it at US$150 and the most bearish at US$122 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. We can infer from the latest estimates that forecasts expect a continuation of Arthur J. Gallagher'shistorical trends, as next year's 5.0% revenue growth is roughly in line with 5.7% annual revenue growth over the past five years. Juxtapose this against our data, which suggests that other companies (with analyst coverage) in the industry are forecast to see their revenues grow 4.9% per year. So although Arthur J. Gallagher is expected to maintain its revenue growth rate, it's only growing at about the rate of the wider industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Arthur J. Gallagher's earnings potential next year. Happily, there were no real changes to sales forecasts, with the business still expected to grow in line with the overall industry. The consensus price target held steady at US$134, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Arthur J. Gallagher going out to 2023, and you can see them free on our platform here.

Plus, you should also learn about the 3 warning signs we've spotted with Arthur J. Gallagher .

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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