Arthur J. Gallagher & Co.
) continues with its acquisitions. The insurance broker has
announced four acquisitions to date in August.
Acquisitions include certain assets of eastern Caribbean based
Minvielle & Chastanet Insurance Brokers (widening presence into
Antigua and Dominica), Connecticut based Cowles & Connell
(enhancing wholesale geographic footprint and network), Missouri
based Trip Mate, Inc. (helping foray into travel insurance market),
and Colorado based Denman Consulting Services (augmenting employee
Arthur J. Gallagher & Co. remains focused on international
expansion through both acquisitions and organic measures. The
company's international operations, primarily in Australia,
Bermuda, Canada, the Caribbean, Singapore, New Zealand and the
U.K., generated about 30% of its revenues. With this flurry of
acquisitions, the number is expected to grow further.
Arthur J. Gallagher & Co.'s growth story looks impressive.
While the buyouts widen its geographical footprint, these also
support the enhanced portfolio of services, and strengthen its
position in retail and wholesale insurance brokerage services and
risk management industries.
In the second quarter of 2014, Arthur J. Gallagher & Co. closed
17 acquisitions with annualized revenues totaling $497.1 million.
In the ongoing quarter, the insurance broker wrapped up seven
acquisitions including the above four and penned a deal for one
Arthur J. Gallagher & Co. expects its clean energy
investments to contribute $99-$110 million to this year's net
earnings that should in turn support its acquisition strategy. In
addition, the company's cash balance - up 3.3 times from 2013 end -
and retained earnings of $596.9 million (up 8.7% from 2013 end)
bear testimony to its financial health.
Though earnings of Arthur J. Gallagher & Co. in the second
quarter missed the Zacks Consensus Estimate and deteriorated from
the year-ago earnings due to higher expenses, it has been
witnessing upward revisions on strong fundamentals. The Zacks
Consensus Estimate moved up as most of the estimates were raised in
the last 30 days. It is currently pegged at $2.51 (up 2%) for 2014
and $2.93 (up 1.7%) for 2015. These translate to year-over-year
improvement of 24.9% and 16.7% for 2014 and 2015, respectively. The
expected long-term earnings growth rate is 14.6%.
With optimism surrounding the acquisitions, we expect analysts to
raise their estimates exerting upward pressure on the Zacks Rank.
The stock presently carries Zacks Rank #3 (Hold).
As insurance brokers choose the inorganic route for growth, the
takeover saga rages the space. This month, Aon plc's (
) global risk management business, Aon Risk Solutions acquired a
Lima-Peru based risk and insurance solutions provider, Grana y
Asociados. In June, Brown & Brown Inc. (
) acquired select assets of Gaston & Associates. Also, Marsh
Inc., the insurance brokerage wing of Marsh & McLennan
Companies Inc. (
) announced its intention to acquire a major stake in Panama-based
Seguros Morrice y Urrutia SA (Semusa) in June.
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