Arthur J Gallagher Poised For Growth Despite Rising Expenses

On Sep 12, 2016, we issued an updated research report on Arthur J Gallagher & Co. (NYSE:AJG) .

Arthur J Gallagher remains focused on tapping opportunities in the U.K., Australia, New Zealand, Canada and the U.S. Also, we expect contribution from international operations to increase going forward.

The insurance broker’s inorganic growth profile continues to flourish with strategic acquisitions, mainly within the brokerage segment. In addition, Arthur J Gallagher has stepped up its acquisition activity in the retail employee benefits brokerage and wholesale brokerage areas. The company intends to undertake even more acquisitions in the second half of the year.

Further, a strong operational performance has contributed in the generation of solid cash flows, thereby enabling Arthur J Gallagher to pursue the necessary strategic initiatives.

Notably, riding on its operational strength, the company is anticipated to witness 15% earnings growth in 2016.

Moreover, a strong capital and liquidity position enables the insurance broker to enhance its shareholder value.

However, the insurance broker has been witnessing escalating expenses, owing to higher compensation and operating expenses. This, in turn, has adversely affected operating margin.

Also, the company has been experiencing increasing debt level resulting in rise in interest expenses. This in turn weighed heavily on margin expansion.

Zacks Rank and Stocks to Consider

Currently, Arthur J Gallagher carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the insurance industry include Erie Indemnity Company (NASDAQ:ERIE) , National Interstate Corporation (NASDAQ:NATL) and NMI Holdings, Inc. (NASDAQ:NMIH) . While Erie Indemnity holds a Zacks Rank #2 (Buy), both National Interstate and NMI Holdings sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Confidential from Zacks

Beyond this Analyst Blog, would you like to see Zacks' best recommendations that are not available to the public? Our Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Click to see them now>>