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What's in Store for Arthur J. Gallagher (AJG) in Q2 Earnings?

Arthur J. Gallagher & Co. AJG is slated to report second-quarter 2020 results on Jul 30, after market close. The company delivered earnings surprise in each of the last four quarters, the average being 5.10%.

Factors to Consider

Arthur J. Gallagher’s second-quarter results are likely to reflect strategic mergers and acquisitions, organic revenue growth and renewal rate increases.

Fees and commissions in the to-be reported quarter are likely to have benefited from new business production, renewal rate increases, strategic buyouts, and organic revenue growth. The Zacks Consensus Estimate for fees is pegged at $472 million, indicating an upside of 1.5% on a year-over-year basis. The consensus mark for commissions stands at $840 million, implying 8% growth.

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 Zacks Consensus Estimate for revenues is pegged at $1.64 billion, indicating an increase of 1.2% from the year-ago reported figure.

The effect of the COVID-19 pandemic lowered exposure growth, which is likely to have been offset by rate increases.

The company expects to reduce expense by $50 million to $75 million in the second quarter. Lower travel, entertainment and advertising expenses ($20 million to $25 million); technology, consulting and other professional fees ($10 million to $20 million); temporary labor and attrition ($10 million to $15 million) as well as lower utilization of health and welfare benefits of ($10 million to $15 million) are likely to have helped it achieve the target.

Foreign exchange is likely to drag down earnings per share by 1 cent.

The Zacks Consensus Estimate for second-quarter earnings per share stands at 72 cents per share, implying an increase of 10.8% from the year-ago quarter reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict 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. But that’s not the case here.

Earnings ESP: Arthur J. Gallagher has an Earnings ESP of 0.00%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are both pegged at 72 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 #3. 

Stocks to Consider 

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

eHealth, Inc. EHTH has an Earnings ESP of +10.81% and a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank stocks here.
Marsh McLennan Companies, Inc. MMC has an Earnings ESP of +3.95% and a Zacks Rank of 3.

Sun Life Financial, Inc. SLF has an Earnings ESP of +1.22% 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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