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What Awaits Arthur J. Gallagher (AJG) This Earnings Season?

Arthur J. Gallagher & Co. AJG is slated to report third-quarter 2020 results on Oct 29, after market close. The company delivered earnings surprise in each of the last four quarters, the average being 11.10%.

Factors to Consider

Strong new business generation, solid retentions and enhanced value-added services for carrier partners are expected to drive third-quarter results of Arthur J. Gallagher.

Fees and commissions in the to-be reported quarter are likely to have benefited from new business generation, higher premium rates across most geographies and increased lines of coverage, revenues associated with acquisitions and organic change in base commissions and fee revenues. The Zacks Consensus Estimate for fees is pegged at $496 million, indicating an upside of 77.8% on a year-over-year basis. The consensus mark for commissions stands at $874 million, implying 7.9% growth.

Lower interest income from U.S. operations due to decreases in interest income earned on client held funds are likely to have hurt the company’s net investment income in the to-be-reported quarter.

Organic commission, fee, supplemental revenues as well as strategic mergers and acquisitions are likely to have fueled revenue increase in the to-be-reported quarter.

The company expects to see increase in property and casualty rates in the to-be-reported quarter.

In the third quarter, the company expects savings in the range of $65 million to $70 million.

The company expects improvement in third-quarter EBITDAC.

Reduced natural gas prices and lower economic activity are likely to have decreased clean energy generation in the to-be-reported quarter.

The Zacks Consensus Estimate for third-quarter earnings per share stands at 89 cents per share, implying an increase of 11.2% from the year-ago quarter reported figure.

What the Zacks Model Says

Our proven model predicts an earnings beat for Arthur J. Gallagher this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat.

Earnings ESP: Arthur J. Gallagher has an Earnings ESP of +1.34%. This is because the Most Accurate Estimate of 90 cents is pegged higher than the Zacks Consensus Estimate of 89 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Arthur J. Gallagher Co. Price and EPS Surprise

Arthur J. Gallagher  Co. Price and EPS Surprise

Arthur J. Gallagher Co. price-eps-surprise | Arthur J. Gallagher Co. Quote

Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #2.  

Other Stocks to Consider  

Some other stocks from the insurance industry with the apt combination of elements to surpass estimates this reporting cycle are as follows:

Marsh McLennan MMC has an Earnings ESP of +2.70% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Willis Towers Watson WLTW has an Earnings ESP of +3.91% and a Zacks Rank of 3.

Sun Life Financial SLF has an Earnings ESP of +4.65% and a Zacks Rank of 3.

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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.

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