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Arthur J. Gallagher (AJG): What's Up this Earnings Season?

Arthur J. Gallagher & Co.AJG is slated to report fourth-quarter 2016 results on Jan 26, after the market closes . Last quarter, the company posted a positive earnings surprise of 1.32%. Let's see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Arthur J. Gallagher is likely to register top-line growth in the to-be-reported quarter, fueled both by organic sales, and strategic mergers and acquisitions (M&A). Management has projected M&A revenues of $28 million in the fourth quarter.

Also, the company is likely to report organic growth in its brokerage segment, driven by stable domestic pricing environment as well as favorable pricing conditions outside the U.S.

Further, the company has likely witnessed organic growth in its employee benefit consulting operation, owing to new business opportunities. Moreover, the company's risk management segment is anticipated to report organic growth in the to-be-reported quarter.

However, the company might have experienced an increase in expenses, primarily due to higher compensation and operating expenses, resulting in margin contraction. In addition, the company estimates integration cost of about 3 cents per share in the fourth quarter.

With respect to the surprise trend, the company delivered positive surprises in all of the last four quarters, with an average beat of 6.26%.

Arthur J. Gallagher & Co. Price and EPS Surprise

Arthur J. Gallagher & Co. Price and EPS Surprise | Arthur J. Gallagher & Co. Quote

Earnings Whispers

Our proven model does not conclusively show that Arthur J. Gallagher is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here as you will see below.

Zacks ESP : Arthur J. Gallagher has an Earnings ESP of -1.52%. This is because the Most Accurate estimate is pegged at 65 cents, while the Zacks Consensus Estimate stands at 66 cents. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter .

Zacks Rank : Arthur J. Gallagher carries a Zacks Rank #3. Though the company has a favorable Zacks Rank, its negative ESP complicates surprise prediction.

We caution against Sell-rated stocks (Zacks Rank #4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some companies from the insurance industry that you may want to consider as these have the right combination of elements to post an earnings beat this quarter:

Chubb Limited CB , which is set to report fourth-quarter earnings on Jan 31, has an Earnings ESP of +2.88% and a Zacks Rank #3. You can see the complete list of today's Zacks #1 Rank stocks here .

American Financial Group, Inc. AFG has an Earnings ESP of +1.89% and a Zacks Rank #2. The company is set to report fourth-quarter earnings on Feb 1.

Validus Holdings, Ltd. VR has an Earnings ESP of +5.13% and a Zacks Rank #1. The company is slated to report fourth-quarter earnings on Feb 2.

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Validus Holdings Ltd. (VR): Free Stock Analysis Report

Arthur J. Gallagher & Co. (AJG): Free Stock Analysis Report

Chubb Corp. (CB): Free Stock Analysis Report

American Financial Group Inc. (AFG): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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