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Valued at a market cap of $66.8 billion, Arthur J. Gallagher & Co. (AJG) provides insurance and reinsurance brokerage, consulting, third-party property/casualty claims settlement, and administration services to entities and individuals. The Rolling Meadows, Illinois-based company also provides a broad range of risk management services and assists clients in all areas of their employee health/welfare and retirement plans as well.
Shares of this insurance company have underperformed the broader market over the past 52 weeks. AJG has gained 21.1% over this time frame, while the broader S&P 500 Index ($SPX) has rallied 31.3%. Nevertheless, on a YTD basis, the stock has soared almost 36.3%, outperforming SPX’s 25.5% gain.
Narrowing the focus, AJG has lagged behind the Financial Select Sector SPDR Fund’s (XLF) 44.3% gain over the past 52 weeks but has outpaced XLF’s 35.8% return on a YTD basis.
Shares of AJG fell 1.6% after its mixed Q3 earnings release on Oct. 24. Its adjusted earnings of $2.26 per share increased 13% on a yearly basis and came in line with the consensus estimates, while its adjusted revenue improved 11.1% year-over-year to $2.74 billion, but slightly missed the Wall Street estimates of $2.75 billion. The revenue miss can be primarily attributed to lower-than-expected revenue generated from the company’s risk management segment.
However, for the current fiscal year, ending in December, analysts expect AJG’s EPS to grow 15.5% year over year to $10.12. The company’s earnings surprise history is promising. It beat or met the consensus estimates in each of the last four quarters.
However, among the 20 analysts covering the stock, the consensus rating is a “Moderate Buy,” which is based on 10 “Strong Buy,” one “Moderate Buy,” seven “Hold,” and two “Moderate Sell” ratings.
The configuration is slightly more bullish than three months ago, with nine analysts suggesting a “Strong Buy.”
On Nov. 12, BMO Capital maintained an “Outperform” rating on AJG and raised its price target to $325- the Street-high price target, which indicates a modest 6.1% potential upside from the current levels.
As of writing, AJG is trading above its mean price target of $297.06.
