Arthur J. Gallagher (AJG) Q3 Earnings & Revenues Top, Up Y/Y

Zacks Equity Research
·3-min read

Arthur J. Gallagher & Co. AJG reported third-quarter 2020 adjusted net earnings of $1.08 per share, which beat the Zacks Consensus Estimate by 20%. Moreover, the bottom line increased about 26% on a year-over-year basis.

The company’s performance was driven by lower expenses, higher adjusted revenues and strong margin expansion across Brokerage and Risk Management segments.   

Operational Update

Total revenues were $1.8 billion, up 1.3% year over year, primarily due to higher commissions, fees, supplemental revenues and, contingent revenues. Moreover, the top line beat the Zacks Consensus Estimate of $1.7 billion.

Arthur J. Gallagher’s total expense decreased 4.1% year over year to $1.6 billion, attributable to lower cost of revenues from clean coal activities and operating costs.

Adjusted earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 0.3% from the prior-year quarter to $433.1 million.

Arthur J. Gallagher Co. Price, Consensus and EPS Surprise

 

Arthur J. Gallagher  Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher Co. Price, Consensus and EPS Surprise

Arthur J. Gallagher Co. price-consensus-eps-surprise-chart | Arthur J. Gallagher Co. Quote

Segment Results

Brokerage: Adjusted revenues of $1.3 billion increased 7.3% year over year on higher commissions, fees, supplemental revenues and contingent revenues.

Expenses increased 2.2% to $1.1 billion due to higher compensation, amortization and change in estimated acquisition earnout payables.

Adjusted EBITDAC climbed 32.2% to $236.4 million while margin expanded 630 basis points (bps) to 33.4%.

Risk Management: Adjusted revenues were down 5% year over year to $202.7 million, primarily due to lower fees.

Expenses decreased 2.5% to $210 million due to lower compensation and operating cost.

Adjusted EBITDAC increased 2.6% year over year to $39.3 million while margin expanded 140 bps to 19.4%.

Corporate: EBITDAC was negative $37.8 million compared with negative $38.3 million in the year-ago quarter.

Financial Update

As of Sep 30, 2020, total assets were $21.8 billion, up 11.1% from 2019-end level.

Cash and cash equivalents at quarter end increased 32.4% from 2019 level to $3.5 billion.

Shareholders’ equity increased 11.6% from the level as of Dec 31, 2019 to $5.8 billion as of Sep 30, 2020.

Acquisition Update

In the quarter, the company closed five acquisitions with estimated annualized revenues of about $13.1 million.

Zacks Rank

Currently, Arthur J. Gallagher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurance Brokers

Of the insurance brokers, which have reported third-quarter results so far, earnings of Brown and Brown BRO, Marsh McLennan Companies MMC and Willis Towers Watson Public Limited Company WLTW beat the respective Zacks Consensus Estimate.

Have You Seen Zacks’ 2020 Election Stock Report?

The upcoming election could be a massive buying opportunity for savvy investors. Trillions of dollars will shift into new market sectors after the election. The question is, which sectors will soar for each candidate? Zacks has put together a new special report to help readers like you target big profits.

The 2020 Election Stock Report reveals specific stocks you’ll want to own immediately after the results are announced – 6 if Trump wins, 6 if Biden wins. Past election reports have led investors to gains of +71%, +83%, even +185% in the following months. This year’s picks could be even more lucrative.

Check out Zacks’ 2020 Election Stock Report >>

 


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
 
Willis Towers Watson Public Limited Company (WLTW) : Free Stock Analysis Report
 
To read this article on Zacks.com click here.
 
Zacks Investment Research