Arthur J. Gallagher & Co.
) recently delivered better than expected fourth quarter results,
driven by 26% revenue growth. Analysts have been raising their
estimates off the strong beat, sending the stock to a Zacks #1 Rank
Based on current consensus estimates, analysts project 30% EPS
growth in 2012 and 12% growth in 2013. On top of this, the company
pays a dividend that yields a solid 4.0%.
Arthur J. Gallagher & Co. is an insurance brokerage and risk
management services firm. The company was founded in 1927 and is
headquartered in Itasca, Illinois. It has a market cap of $3.8
Fourth Quarter Results
The company delivered better than expected results for the fourth
quarter after the bell on January 31. Earnings per share came in at
35 cents, beating the Zacks Consensus Estimate by a penny. It was a
solid 19% increase over the same quarter in 2010.
Sales rose 26% to $578 million, well ahead of the Zacks Consensus
Estimate of $548 million. Adjusted revenues surged 22% in the
Brokerage division, due in large part to acquisitions and a 5%
increase in organic commission, fee and supplemental commission
The Risk Management segment saw adjusted top-line growth of 13%,
driven by organic growth of 13%.
Analysts have been raising their estimates for both 2012 and 2013
following the strong Q4, sending the stock to a Zacks #1 Rank
The Zacks Consensus Estimate for 2012 is now $1.78, representing
30% growth over 2011 EPS. The 2013 consensus estimate is currently
$2.00, corresponding with 12% growth.
Analysts believe that modestly improving pricing and economic
trends, as well as continued acquisition activity, will drive
strong EPS growth over the next couple of years.
Arthur J. Gallagher also pays a dividend that yields a stellar
4.0%. It recently increased its dividend by 3%, and since 2000, it
has raised it at a compound annual rate of 9%:
Shares of AJG trade at 18.6x forward earnings, a premium to its
10-year median of 15.7x. But given its strong growth projections,
this certainly isn't unreasonable.
Its price to cash flow ratio of 14.0 is in-line with its historical
The Bottom Line
With rising earnings estimates, strong growth projections, a solid
4.0% dividend yield and reasonable valuation, Arthur J. Gallagher
& Co. offers investors a lot to like.
Todd Bunton is the Growth & Income Stock Strategist for
and Co-Editor of the
Reitmeister Value Investor
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