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Arthur J Gallagher Hits 52-Week High on Solid Q4 Results

Zacks Equity Research

Shares of Arthur J. Gallagher & Co. AJG scaled a fresh 52-week high of $109.19 on Feb 14, eventually closing at $109.16. The company’s impressive fourth-quarter earnings performance and its recent buyout contributed to this rally.

In the past year, this Zacks Rank #3 (Hold) stock has gained 36.7% compared with the industry’s growth of 31.9%.


Let’s delve deeper to analyze the factors responsible for the stock’s upsurge.

Driving Factors

In the fourth quarter of 2019, this insurance broker reported earnings of 58 cents per share, which beat the Zacks Consensus Estimate by 7.4%. Moreover, the bottom line increased 9.4% on a year-over-year basis. The company’s performance was driven by higher adjusted revenues across Brokerage and Risk Management segments. Also, total revenues were $1.7 billion, up 3.9% year over year.

In the Brokerage segment, revenues increased 19% year over year on higher fees and commission as well as supplemental and contingent revenues. Revenues in the Risk Management segment rose 6.8% year over year, mainly owing to higher fees.

Its dividend yield is currently 1.6%, which compares favourably with the industry average of 1.2%. This makes the stock an attractive pick for yield-seeking investors.

The stock is likely to have received a boost from its recent acquisition of Affiliated Benefit Consultants, Inc., earlier this month, which offers brokerage and consulting solutions to employers looking to take charge of their benefit programs. This growth-oriented benefit consultant will boost brokerage and consulting services of Arthur J. Gallagher, thus turning out to be a strategic fit.

Arthur J. Gallagher is focused on organic sales as well as acquisition and mergers to drive revenues. In 2019, the company closed a total of 49 buyouts with estimated annualized revenues of $468 million. In the fourth quarter, the company closed 11 acquisitions with estimated annualized revenues of about $117 million.

Stocks to Consider

Some better-ranked stocks from the same space are Cincinnati Financial Corporation CINF, Brown & Brown BRO and Aon plc AON. While Cincinnati Financial sports a Zacks Rank #1 (Strong Buy), Brown & Brown and Aon carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Cincinnati Financial provides property casualty insurance products in the United States. The company beat earnings estimates in the trailing four quarters, the average being 17.86%.

Brown & Brown markets and sells insurance products and services in the United States, England, Canada, Bermuda, and the Cayman Islands. It came up with average four-quarter positive surprise of 7.97%.

Aon offers advisory and solutions based on risk, retirement, and health to clients and provides commercial risk solutions, including retail brokerage, cyber, and global risk consulting solutions, as well as acts as a captive insurance provider.  The company beat the Zacks Consensus Estimate in three of the last four reported quarters, the average beat being 0.62%.

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