Arthur J. Gallagher & Co.
) announced acquisitions back-to-back to date in June. The
insurance broker recently took over Wesfarmers' insurance brokerage
operations in Australia, New Zealand and the United Kingdom. Last
week, it acquired Bridgewater, NJ-based The Plus Companies, Inc.
and Tri-State General of Salisbury, MD.
While the Wesfarmers acquisition will enhance Risk Placement
Services' by expanding the company's wholesale network, the
addition of Tri-State would enhance its U.S. wholesale operations.
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., generate about one-fourth of its revenues. With
this flurry of acquisitions, the number is expected to grow
further. Revenue growth was the primary contributor of the
company's bottom-line improvement in the last quarter. Earnings
outperformed the Zacks Consensus Estimate by 52% and year-ago
number by 22%.
Arthur J. Gallagher & Co.'s growth story looks impressive. In
the first quarter of 2014, it made nine acquisitions with
annualized revenues totaling $17.8 million. In the ongoing second
quarter, the company has already announced 11 buyouts including the
last three. Arthur J. Gallagher & Co. expects its clean
energy investments to contribute $90.0-$100.0 million to this
year's net earnings that should in turn support its acquisition
strategy. In addition, the company's cash balance - up 2.5 times
from 2013 end - and retained earnings of $596.9 million bear
testimony to its financial health. With optimism surrounding the
acquisitions, the estimates for this Zacks Rank #3 (Hold) insurance
broker have been witnessing upward revisions. The Zacks Consensus
Estimate for 2014 is currently pegged at $2.47 and the same for
2015 is $2.89. These translate to year-over-year improvement of
22.8% and 16.7% for 2014 and 2015, respectively. The expected
long-term earnings growth rate is 12.8%.
As insurance brokers choose the inorganic route for growth, the
takeover saga rages the space. Last week,
Brown & Brown Inc
) purchased certain assets of Gaston & Associates, Inc., while
Aon US Holdings, Inc. - subsidiary of
) - inked a definitive acquisition deal with StoneRiver Group, L.P.
for StoneRiver National Flood Services, Inc. and certain related
entities. But the June takeover chapter was started by Marsh &
McLennan Agency LLC (MMA), a subsidiary of
Marsh & McLennan
), which acquired Senn Dunn Insurance - the largest independent
insurance agency in North Carolina.
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 (MMC): Free Stock Analysis
AON PLC (AON): Free Stock Analysis Report
GALLAGHER ARTHU (AJG): Free Stock Analysis
BROWN & BROWN (BRO): Free Stock Analysis
To read this article on Zacks.com click here.