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Arthur J. Gallagher (AJG)
:AJG
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Arthur J Gallagher & Co
(NYSE:AJG)79Outperform
Positive Factors
Mergers and Acquisitions
M&A activities are expected to grow AJG's EBITDA by over 40% in 2025, with additional upside from deal synergies.
Valuation Attractiveness
AJG's valuation is considered attractive, trading below its pre-Assured Partners multiple.
Negative Factors
Reinsurance Pricing
Reinsurance pricing deceleration could impact AJ Gallagher's early 2025 organic growth trajectory.
Arthur J Gallagher & Co (AJG) vs. S&P 500 (SPY)
Market Cap
$85.90B
Dividend Yield0.7%
Average Volume (3M)1.56M
Price to Earnings (P/E)51.9
Beta (1Y)0.32
Revenue Growth15.21%
EPS Growth46.99%
CountryUS
Employees56,000
SectorFinancial
Sector Strength93
IndustryInsurance
Share Statistics
EPS (TTM)6.53
Shares Outstanding254,700,000
10 Day Avg. Volume1,318,911
30 Day Avg. Volume1,558,265
Financial Highlights & Ratios
PEG Ratio1.10
Price to Book (P/B)N/A
Price to Sales (P/S)7.53
Price to Cash Flow (P/CF)29.40
P/FCF Ratio29.40
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$327.92Price Target Upside-2.77% Downside
Rating ConsensusModerate Buy
Number of Analyst Covering12
Arthur J Gallagher & Co Business Overview & Revenue Model
Company DescriptionArthur J. Gallagher & Co. engages in the provision of insurance brokerage, consulting, and third party claims settlement and administration services to both domestic and international entities. It operates through the following business segments: Brokerage, Risk Management and Corporate. The Brokerage segment comprises of retail and wholesale insurance brokerage operations. The Risk Management segment provides contract claim settlement and administration services for enterprises and public entities that choose to self-insure some or all of their property/casualty coverages and for underwriting enterprises that choose to outsource some or all of their property/casualty claims departments. The Corporate segment manages clean energy and other investments. The company was founded by Arthur J. Gallagher on October 1, 1927 and is headquartered in Rolling Meadows, IL.
How the Company Makes MoneyArthur J. Gallagher & Co. generates revenue primarily through commissions and fees earned from its brokerage and risk management services. The company acts as an intermediary between clients and insurance carriers, earning commissions on the insurance policies it places. Additionally, AJG provides consulting and advisory services that generate fees, offering strategic advice on risk management, benefits, and reinsurance. Partnerships with insurance carriers and expanding global markets also contribute to its earnings, allowing the company to leverage its extensive network and expertise to deliver value-added services to its clients.
Arthur J Gallagher & Co Financial Statement Overview
Summary
Arthur J Gallagher & Co shows a strong financial foundation with significant revenue growth and improved profitability margins. The low debt-to-equity ratio and robust ROE reflect financial stability, while positive cash flow dynamics enhance the company's financial position.Income Statement
Arthur J Gallagher & Co has demonstrated strong revenue growth, with a 14.7% increase in Total Revenue from 2023 to 2024. The Gross Profit Margin for 2024 is approximately 84.8%, indicating effective cost management. The Net Profit Margin also improved to 12.7%, showcasing enhanced profitability. Consistent EBIT and EBITDA margins of 28.4% further highlight operational efficiency.85
Very Positive
Balance Sheet
The company maintains a healthy financial position with a low Debt-to-Equity Ratio of approximately 0.03 in 2024, reflecting strong equity backing. The Return on Equity (ROE) is robust at 7.2%, indicating effective use of equity to generate profits. The Equity Ratio stands at 31.4%, suggesting a solid equity base relative to total assets, though there could be opportunities to optimize asset utilization.80
Positive
Cash Flow
Arthur J Gallagher & Co exhibits positive cash flow dynamics, with Free Cash Flow growing by 32.8% from 2023 to 2024. The Operating Cash Flow to Net Income Ratio is 1.77, signaling strong cash generation relative to net income. Free Cash Flow to Net Income Ratio of 1.67 further emphasizes efficient cash flow conversion, although the company should monitor its capital expenditure trends.78
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 11.55B | 10.07B | 8.55B | 8.21B | 7.00B | Gross Profit |
| 9.80B | 4.25B | 3.60B | 2.98B | 2.50B | EBIT |
| 3.28B | 1.86B | 1.75B | 1.47B | 1.00B | EBITDA |
| 3.10B | 2.18B | 2.35B | 2.04B | 1.56B | Net Income Common Stockholders |
| 1.46B | 969.50M | 1.11B | 906.80M | 818.80M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 14.99B | 971.50M | 342.30M | 402.60M | 664.60M | Total Assets |
| 64.26B | 51.62B | 38.91B | 33.34B | 22.33B | Total Debt |
| 528.10M | 8.32B | 6.42B | 6.59B | 4.87B | Net Debt |
| -14.46B | 7.35B | 6.07B | 6.19B | 4.20B | Total Liabilities |
| 44.08B | 40.80B | 29.72B | 24.78B | 16.10B | Stockholders Equity |
| 20.18B | 10.78B | 9.14B | 8.51B | 6.19B |
| Cash Flow | Free Cash Flow | |||
| 2.44B | 1.84B | 1.94B | 1.58B | 1.65B | Operating Cash Flow |
| 2.58B | 2.03B | 2.13B | 1.70B | 1.75B | Investing Cash Flow |
| -1.59B | -3.29B | -1.00B | -3.43B | -416.80M | Financing Cash Flow |
| 13.05B | 2.87B | -522.80M | 2.68B | -505.10M |
Arthur J Gallagher & Co Technical Analysis
Positive
337.27
Price Trends
303.87
Positive
298.02
Positive
285.61
Positive
Market Momentum
9.36
Negative
67.85
Neutral
84.51
Negative
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AJG, the sentiment is Positive. The current price of 337.27 is above the 20-day moving average (MA) of 326.74, above the 50-day MA of 303.87, and above the 200-day MA of 285.61, indicating a bullish trend. The MACD of 9.36 indicates Negative momentum. The RSI at 67.85 is Neutral, neither overbought nor oversold. The STOCH value of 84.51 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for AJG.
Arthur J Gallagher & Co Risk Analysis
Arthur J Gallagher & Co disclosed 32 risk factors in its most recent earnings report. Arthur J Gallagher & Co reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Arthur J Gallagher & Co Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
79 Outperform | $85.90B | 51.88 | 9.46% | 0.70% | 15.21% | 46.99% | |
79 Outperform | $33.76B | 11.43 | 18.92% | 1.63% | 8.19% | 29.77% | |
77 Outperform | $34.07B | 34.50 | 16.35% | 0.47% | 12.89% | 13.50% | |
76 Outperform | $116.81B | 29.06 | 30.00% | 1.32% | 7.60% | 8.66% | |
73 Outperform | $88.37B | 32.76 | 43.36% | 0.66% | 17.51% | 1.31% | |
67 Neutral | $6.11B | 1.95 | 39.61% | 4.75% | 47.95% | ― | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
AJG
Arthur J Gallagher & Co
337.27
93.49
38.35%
AON
Aon
404.68
92.03
29.44%
BRO
Brown & Brown
119.17
35.55
42.51%
HIG
Hartford Financial
116.98
22.78
24.18%
LNC
Lincoln National
35.88
11.03
44.39%
MMC
Marsh & Mclennan Companies
236.77
37.81
19.00%
Arthur J Gallagher & Co Earnings Call Summary
Earnings Call Date: Jan 30, 2025 | % Change Since: 12.79% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Positive
The earnings call reflected a positive sentiment overall, with strong revenue growth, successful acquisitions, and a favorable market environment. Despite some challenges, particularly in contingent revenue and the impact of wildfires, the outlook remains optimistic with robust M&A activity and a strong U.S. labor market.Highlights
Record Revenue Growth
The company achieved 12% growth in revenue for the combined brokerage and risk management segments, marking the 16th consecutive quarter of double-digit revenue growth.
Strong Financial Performance
Adjusted EBITDA grew by 17%, and the adjusted EBITDAC margin was up by 145 basis points year-over-year to 31.4%. Adjusted earnings per share increased by 15% year-over-year to $2.51.
Successful Acquisition Strategy
Completed 20 new tuck-in mergers representing around $200 million of estimated annualized revenue. The acquisition of AssuredPartners is expected to bring in $2.9 billion of annual revenue.
Positive Market Environment
The global P/C insurance market continues to grow, with renewal premium increases ticking slightly higher than the fourth quarter and above 5%.
U.S. Labor Market Strength
The U.S. labor market remains strong, with a steady number of open jobs and employers looking to grow their workforce.
Mergers and Acquisitions Pipeline
About 45 term sheets are signed or being prepared, representing around $650 million of annualized revenue.
Strong Performance in Risk Management Segment
Gallagher Bassett posted 9% revenue growth, including 6% organic growth, with an adjusted EBITDAC margin of 20.6%.
Lowlights
Decline in Canadian Revenue
Canada experienced a slight downturn, with revenue down by a couple of percent due to lower contingents.
Challenges in Contingent Revenue
While contingents went backwards a bit this quarter, leading to a $7 million shortfall compared to expectations.
Impact of Wildfires in California
The company faces ongoing challenges due to the tragic wildfires in California, impacting operations and requiring significant resource allocation for claims management.
Company Guidance
During the Fourth Quarter 2024 earnings call, Arthur J. Gallagher & Company reported strong financial performance across its brokerage and risk management segments, highlighting a 12% revenue growth and 7% organic growth. The company achieved a reported net earnings margin of 13.5%, with adjusted EBITDA growth of 17% and adjusted EBITDAC margin of 31.4%, marking a 145 basis point improvement year-over-year. GAAP earnings per share were $1.56, while adjusted earnings per share increased by 15% to $2.51. The brokerage segment experienced a 12% revenue growth, with 7.1% organic growth, and an adjusted EBITDAC margin expansion of 168 basis points to 33.1%. The risk management segment, Gallagher Bassett, saw a 9% revenue growth, including 6% organic growth, with an adjusted EBITDAC margin of 20.6%. The company also completed 20 new tuck-in mergers, representing approximately $200 million in estimated annualized revenue, and signed an agreement to acquire AssuredPartners, expected to generate $2.9 billion in annual pro forma revenue. Looking ahead, the company anticipates 2025 brokerage segment organic growth to remain in the 6% to 8% range, driven by a favorable insurance pricing environment and strong U.S. labor market conditions.Arthur J Gallagher & Co Corporate Events
Business Operations and StrategyFinancial Disclosures
Arthur J Gallagher & Co Reports Strong 2024 Results
Positive
Jan 30, 2025
On January 29, 2025, Arthur J. Gallagher & Co. amended its bylaws to clarify roles and streamline processes, aiming to enhance governance. Additionally, the company reported its fourth quarter and full-year 2024 financial results, highlighting an increase in revenue and earnings compared to the previous year, indicating strong operational performance.
M&A TransactionsBusiness Operations and Strategy
Arthur J Gallagher & Co to Acquire AssuredPartners
Positive
Dec 9, 2024
Arthur J. Gallagher & Co. announced a $13.45 billion agreement to acquire AssuredPartners, enhancing its market position in the U.S. with an expected closure in early 2025. The deal aims to capitalize on AssuredPartners’ U.S. footprint and middle-market focus, promising benefits like expanded capabilities and synergies. Gallagher plans to fund the acquisition through a mix of financing options, anticipating significant EPS accretion and integration synergies post-acquisition, which is subject to regulatory approvals.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.