Arthur J. Gallagher (AJG) Q3 Earnings & Revenues Top, Up Y/Y
Arthur J. Gallagher & Co. AJG reported third-quarter 2020 adjusted net earnings of $1.08 per share, which beat the Zacks Consensus Estimate by 20%. Moreover, the bottom line increased about 26% on a year-over-year basis.
The company’s performance was driven by lower expenses, higher adjusted revenues and strong margin expansion across Brokerage and Risk Management segments.
Operational Update
Total revenues were $1.8 billion, up 1.3% year over year, primarily due to higher commissions, fees, supplemental revenues and, contingent revenues. Moreover, the top line beat the Zacks Consensus Estimate of $1.7 billion.
Arthur J. Gallagher’s total expense decreased 4.1% year over year to $1.6 billion, attributable to lower cost of revenues from clean coal activities and operating costs.
Adjusted earnings before interest, tax, depreciation and amortization and change in estimated acquisition earnout payables (EBITDAC) grew 0.3% from the prior-year quarter to $433.1 million.
Arthur J. Gallagher Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher Co. price-consensus-eps-surprise-chart | Arthur J. Gallagher Co. Quote
Segment Results
Brokerage: Adjusted revenues of $1.3 billion increased 7.3% year over year on higher commissions, fees, supplemental revenues and contingent revenues.
Expenses increased 2.2% to $1.1 billion due to higher compensation, amortization and change in estimated acquisition earnout payables.
Adjusted EBITDAC climbed 32.2% to $236.4 million while margin expanded 630 basis points (bps) to 33.4%.
Risk Management: Adjusted revenues were down 5% year over year to $202.7 million, primarily due to lower fees.
Expenses decreased 2.5% to $210 million due to lower compensation and operating cost.
Adjusted EBITDAC increased 2.6% year over year to $39.3 million while margin expanded 140 bps to 19.4%.
Corporate: EBITDAC was negative $37.8 million compared with negative $38.3 million in the year-ago quarter.
Financial Update
As of Sep 30, 2020, total assets were $21.8 billion, up 11.1% from 2019-end level.
Cash and cash equivalents at quarter end increased 32.4% from 2019 level to $3.5 billion.
Shareholders’ equity increased 11.6% from the level as of Dec 31, 2019 to $5.8 billion as of Sep 30, 2020.
Acquisition Update
In the quarter, the company closed five acquisitions with estimated annualized revenues of about $13.1 million.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurance Brokers
Of the insurance brokers, which have reported third-quarter results so far, earnings of Brown and Brown BRO, Marsh McLennan Companies MMC and Willis Towers Watson Public Limited Company WLTW beat the respective Zacks Consensus Estimate.
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