What Awaits Arthur J. Gallagher (AJG) This Earnings Season?
Arthur J. Gallagher & Co. AJG is slated to report third-quarter 2023 earnings on Oct 26, after market close. The insurer delivered an earnings surprise in each of the last four reported quarters, the average beat being 2.20%.
Factors to Consider
Solid results in both segments, aided by new business, strong retention and increasing renewal premiums across its business lines, are likely to benefit Arthur J. Gallagher’s third-quarter results.
Revenues associated with acquisitions, the organic change in base commissions and fee revenues are likely to have favored commission and fee revenues in the third quarter of 2023. The Zacks Consensus Estimate for fees is pegged at $781 million, indicating an increase of 16.4% from the prior-year period’s reported number. The consensus mark for commissions is pegged at $1.4 billion, implying 20.2% growth from the prior-year period’s reported number.
We estimate fees of $821.2 million, up 22.3% and commission of $1.4 billion, up 16.1% in the to-be-reported quarter.
The property and casualty brokerage operations are likely to have been aided by continued strong customer retention, new business generation and increasing renewal premiums in the to-be-reported quarter.
The company expects brokerage organic growth at around 9% for the third quarter.
The risk management segment is likely to have been aided by rising claim counts and continued growth from recent new business wins. The company expects organic growth at 14% in the to-be-reported quarter.
Net investment income in the to-be-reported quarter is likely to have benefited from an increase in interest income from higher interest rates earned on funds. We expect an investment income of $57 million in the to-be-reported quarter. The Zacks Consensus Estimate for net investment income is pegged at $55 million.
Higher commissions and fees, increased supplemental revenues, improved contingent revenues and investment income as well as strategic mergers and acquisitions are likely to have driven the top line in the to-be-reported quarter. The Zacks Consensus Estimate for third-quarter revenues is pinned at $2.4 billion, indicating an increase of 19.8% from the year-ago reported figure.
Total expenses are likely to have increased mainly because of higher compensation, operating costs, interest expenses, amortization and changes in estimated acquisition earnout payables. We expect total expenses to increase 22.1% to $2.1 billion in the to-be-reported quarter.
The Zacks Consensus Estimate for third-quarter earnings per share is pegged at $1.94, indicating an increase of 12.7% from the year-ago reported figure.
What Our Quantitative Model Predicts
Our proven model does not conclusively predict an earnings beat for Arthur J. Gallagher this time around. This is because the stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for an earnings beat. This is not the case, as you can see here.
Earnings ESP: Arthur J. Gallagher has an Earnings ESP of -0.59%. This is because the Most Accurate Estimate of $1.93 is pegged lower than the Zacks Consensus Estimate of $1.94. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Arthur J. Gallagher & Co. Price and EPS Surprise
Arthur J. Gallagher & Co. price-eps-surprise | Arthur J. Gallagher & Co. Quote
Zacks Rank: AJG currently carries a Zacks Rank #3.
Stocks to Consider
Some insurance stocks with the right combination of elements to deliver an earnings beat this time around are:
Enact Holdings, Inc. ACT has an Earnings ESP of +2.33% and a Zacks Rank #1 at present. The Zacks Consensus Estimate for third-quarter 2023 earnings is pegged at 86 cents, indicating a year-over-year decline of 26.5%. You can see the complete list of today’s Zacks #1 Rank stocks here.
ACT’s earnings beat estimates in three of the last four quarters and missed in the other one.
The Hartford Financial Services Group, Inc. HIG has an Earnings ESP of +1.61% and a Zacks Rank #2 at present. The Zacks Consensus Estimate for third-quarter 2023 earnings is pegged at $1.95, indicating a year-over-year increase of 35.4%.
HIG’s earnings beat estimates in three of the last four quarters and matched in one.
American International Group, Inc. AIG has an Earnings ESP of +4.02% and a Zacks Rank #2 at present. The Zacks Consensus Estimate for third-quarter 2023 earnings is pegged at $1.55, indicating a year-over-year increase of 134.8%.
AIG’s earnings beat estimates in each of the last four quarters.
Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.
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The Hartford Financial Services Group, Inc. (HIG) : Free Stock Analysis Report
American International Group, Inc. (AIG) : Free Stock Analysis Report
Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
Enact Holdings, Inc. (ACT) : Free Stock Analysis Report
