AJG Outperforms Industry, Trades at Premium: How to Play the Stock
Shares of Arthur J. Gallagher & Co. AJG have gained 24.5% in the past year, outperforming its industry, the Finance sector and the Zacks S&P 500 composite's return of 24.1%, 19.7% and 11.9%, respectively.The insurer has a market capitalization of $81.38 billion. The average volume of shares traded in the last three months was 1.3 million.
Image Source: Zacks Investment Research
Arthur J. Gallagher shares are trading well above the 200-day moving average, indicating a bullish trend.
Image Source: Zacks Investment Research
AJG shares are trading at a premium to the industry. Its price-to-book value of 26.19X is higher than the industry average of 22.71X. Shares of other insurers like Brown & Brown, Inc. BRO and Erie Indemnity Company ERIE are also trading at a multiple higher than the industry average, while Marsh & McLennan Companies, Inc. MMC is trading at a discount.
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for Arthur J. Gallagher's 2025 earnings per share indicates a year-over-year increase of 9.4%. The consensus estimate for revenues is pegged at $13.75 billion, implying a year-over-year improvement of 20.9%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 22.5% and 22.9%, respectively, from the 2025 estimates.Earnings of Arthur J. Gallagher grew 20.4% in the last five years, better than the industry average of 15.2%.
Arthur J. Gallagher's bottom line surpassed earnings estimates in three of the last four quarters and matched in one, the average being 2.29%.
Five of the seven analysts covering the stock have lowered estimates for 2025, while three analysts have lowered the same for 2026 over the past 30 days.The Zacks Consensus Estimate for 2025 earnings has moved down 1.2% in the past 30 days, while the same for 2026 has moved down 0.4% in the same time frame.
Image Source: Zacks Investment Research
Based on short-term price targets offered by 15 analysts, the Zacks average price target is $345.00 per share. The average indicates a potential 4.9% upside from the last closing price.
Image Source: Zacks Investment Research
Arthur J. Gallagher insurer remains focused on generating both organic (particularly international) and inorganic growth and is, thus, tapping into growth opportunities worldwide. This, coupled with solid retention and improving renewal premiums across all major geographies and most product lines, bodes well for growth. Arthur J. Gallagher expects organic growth to improve in the second half of 2025 in the Risk Management segment. Looking forward, AJG expects 2025 adjusted EBITDAC margin to be 20.5%. It continues to expect the Brokerage segment's organic growth in the range of 6% to 8% for 2025. AJG's revenues are geographically diversified with strong domestic and international operations. International contributes about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contributions to its total revenues to trend upward. Its inorganic growth story is impressive. Since Jan. 1, 2002, the company has acquired 761 companies so far. Revenue growth rates generally ranged from 5% to 17.5% for 2025 acquisitions. During the first quarter, AJG completed 11 new tuck-in mergers, representing around $100 million of estimated annualized revenues. Looking at the pipeline, AJG has more than 40 term sheets signed or being prepared, representing about $450 million of annualized revenues.Banking on its capital position, AJG distributes wealth to shareholders through dividend hikes and share repurchases. In the first quarter of 2025, the dividend was raised by 8.3%, witnessing a six-year CAGR (2020-2025) of 7.6%.However, Arthur J. Gallagher has been experiencing an increase in expenses due to higher compensation and operating expenses that have been eroding margins.
AJG continues to benefit from solid retention, improving renewal premiums, and organic and inorganic growth. The Risk Management and Brokerage segments should continue to witness significant growth. A robust capital position over the years reflects its financial flexibility. Its impressive dividend history, as well as solid growth projections, are other positives.Given the escalating expenses, bearish analysts' sentiment and premium valuation, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report
Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report
Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
Erie Indemnity Company (ERIE) : Free Stock Analysis Report
This article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Yahoo
23 minutes ago
- Yahoo
Why Rivian Automotive (RIVN) Dipped More Than Broader Market Today
Rivian Automotive (RIVN) ended the recent trading session at $14.20, demonstrating a -1.39% swing from the preceding day's closing price. The stock fell short of the S&P 500, which registered a loss of 0.27% for the day. Coming into today, shares of the a manufacturer of motor vehicles and passenger cars had lost 3.16% in the past month. In that same time, the Auto-Tires-Trucks sector gained 5.86%, while the S&P 500 gained 6.9%. Analysts and investors alike will be keeping a close eye on the performance of Rivian Automotive in its upcoming earnings disclosure. In that report, analysts expect Rivian Automotive to post earnings of -$0.65 per share. This would mark year-over-year growth of 46.28%. Meanwhile, the Zacks Consensus Estimate for revenue is projecting net sales of $1.29 billion, up 11.22% from the year-ago period. For the full year, the Zacks Consensus Estimates project earnings of -$2.49 per share and a revenue of $5.25 billion, demonstrating changes of +38.37% and +5.66%, respectively, from the preceding year. It is also important to note the recent changes to analyst estimates for Rivian Automotive. These revisions help to show the ever-changing nature of near-term business trends. As a result, upbeat changes in estimates indicate analysts' favorable outlook on the business health and profitability. Our research suggests that these changes in estimates have a direct relationship with upcoming stock price performance. To utilize this, we have created the Zacks Rank, a proprietary model that integrates these estimate changes and provides a functional rating system. The Zacks Rank system, ranging from #1 (Strong Buy) to #5 (Strong Sell), possesses a remarkable history of outdoing, externally audited, with #1 stocks returning an average annual gain of +25% since 1988. Within the past 30 days, our consensus EPS projection has moved 1.54% lower. As of now, Rivian Automotive holds a Zacks Rank of #3 (Hold). The Automotive - Domestic industry is part of the Auto-Tires-Trucks sector. This industry currently has a Zacks Industry Rank of 217, which puts it in the bottom 12% of all 250+ industries. The Zacks Industry Rank gauges the strength of our industry groups by measuring the average Zacks Rank of the individual stocks within the groups. Our research shows that the top 50% rated industries outperform the bottom half by a factor of 2 to 1. Be sure to use to monitor all these stock-influencing metrics, and more, throughout the forthcoming trading sessions. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Rivian Automotive, Inc. (RIVN) : Free Stock Analysis Report This article originally published on Zacks Investment Research ( Zacks Investment Research
Business Insider
31 minutes ago
- Business Insider
Closing Bell Movers: Oracle jumps 7% after Q4 earnings beat
In the opening hour of the evening session, U.S. equity futures are lower, with modest degree of caution emerging after the main indices broke a string of three consecutive winning sessions on Wednesday. S&P 500, Nasdaq 100, and Dow Industrials are all down about 0.2%. Confident Investing Starts Here: Easily unpack a company's performance with TipRanks' new KPI Data for smart investment decisions Receive undervalued, market resilient stocks right to your inbox with TipRanks' Smart Value Newsletter Heightened geopolitical tensions may serve as a catalyst for some profit-taking despite the benign inflation data and more visibility on U.S.-China tariff deal framework, with Reuters reporting late in the day that U.S. may partially evacuate its Iraq embassy and families of military personnel in the Middle East. Following the report, front-month WTI Crude Oil futures extended their advance toward $69 per barrel – up 6% from yesterday's close and the highest level since early April. Elsewhere in commodities, Gold jumped over 1% toward $3,400 per ounce. Earlier on Wednesday, Energy was again the best performing segment of the S&P 500 following the earlier rally in Oil prices while Consumer Discretionary and Materials sectors lagged. Following tame CPI data, Treasury yields were also down notably, with the 10-year pulling back toward 4.40% as markets priced in a greater likelihood of a more accommodative FOMC stance by 2025-end. Check out this evening's top movers from around Wall Street, compiled by The Fly. HIGHER AFTER EARNINGS – ALSO HIGHER – Applied Optoelectronics (AAOI) up 15.3% after announcing first volume shipment of data center transceivers Voyager Technologies (VOYG) up 7.9% on momentum following 82.2% IPO debut day Dana Incorporated (DAN) up 4.5% after announcing sale of Off-Highway business to Allison Transmission for $2.7B DOWN AFTER EARNINGS – Oxford Industries (OXM) down 8.4% ALSO LOWER –
Yahoo
an hour ago
- Yahoo
Analysis-As global tumult grows, UK Plc's stability and bargains appeal to dealmakers
By Amy-Jo Crowley, Yadarisa Shabong and Purvi Agarwal LONDON (Reuters) -More than $10 billion in bids for British companies announced on Monday, this year's busiest day according to Dealogic data, showed how low valuations and the market's relative stability were attracting rivals and funds after a volatility-induced pause. Companies may also be using the opportunity to enter the UK market before potential further weakening of the dollar or strengthening of the pound made future transactions more expensive, analysts said. Among those to announce takeover offers for UK firms on Monday were U.S. chipmaker Qualcomm, private equity firm Advent, and France's L'Oreal. While U.S. President Donald Trump's announcement of sweeping tariffs and the resulting volatility hampered dealmaking for weeks, some companies are now finding the right conditions to agree on transactions. Niccolo de Masi, CEO of Maryland-based IonQ, which on Monday announced a $1.08 billion acquisition of British quantum computing firm Oxford Ionics, said that in addition to Britain's talent pool, the geopolitical backdrop made the deal more compelling as governments want more "sovereign quantum networks," he said. "People want things on-premise and they want things to be local," de Masi told Reuters. So far this year, there have already been 30 bids for UK companies valued at more than 100 million pounds ($135.44 million), compared with 26 over the same period of last year and 45 for the whole of 2024, according to Peel Hunt. The total value of 24 billion pounds of deals announced to date compared with 36 billion pounds in the year-ago period, which was skewed by a few large deals, such as International Paper's $7.1 billion bid for D.S Smith. Years of outflows from UK equities that depressed valuations for British companies compared with their competitors listed on other European or U.S. exchanges, have played a role in making them more attractive as acquisition targets. For example, the discount between the FTSE 100 [.FTSE] and the U.S. S&P 500 [.SPX] benchmarks peaked at about 49.5% in January and is about 41% now. "Management teams have been happier to accept bids because sometimes that is an easier way to crystallize the valuations and as equity markets have been so challenging for so long," Amanda Yeaman, co-manager of the abrdn UK Smaller Companies Fund and the abrdn UK Smaller Companies Growth Trust plc. Moreover, bidders are being drawn to a relatively stable UK economic and political backdrop. "We now have an improving economic environment in the UK, and the regulatory position is much more predictable," said Charles Hall, head of research at Peel Hunt. "Buying a UK company at the moment is likely to be less risky than, say, buying a U.S. business." The trade deals that Britain has pursued also show the country is "open for business," Yeaman said. And with no general election due soon, Britain promises political stability. "Our markets really like stability and for the next four years, that is something that we have, which is less predictable in other geographies," she said. Analysts also say the pound's strength does not seem to act as a deterrent. "Particularly global investors, U.S. investors are thinking, let's grab as much as we can before things get more expensive and currency tailwinds are still there," said Magesh Kumar, equity strategist at Barclays. This year's largest bids so far were all announced this week, with Advent offering 3.7 billion pounds for scientific instruments maker Spectris and Qualcomm's 1.8 billion pound bid for Alphawave, and some advisers expect many more to come. Erik O'Connor, partner at Clifford Chance, said that while economic uncertainties could weigh on the M&A market, factors such as more predictable outlook for interest rates and UK companies' improved balance sheets should encourage dealmaking. "There's a sense that key fundamentals are in the right place to transact," O'Connor said, pointing to technology and real estate, the busiest sectors so far this year according to Dealogic, as those less susceptible to recent market volatility. "I would not be surprised if we continue at a similar pace," he said. ($1 = 0.7383 pounds) Sign in to access your portfolio
