Arthur J. Gallagher (AJG) Q1 Earnings And Revenues Beat

Arthur J. Gallagher & Co. (NYSE:AJG) recently reported first-quarter 2017 adjusted net earnings of 40 cents per share, which beat the Zacks Consensus Estimate by 2.6%. Also, the bottom line improved 17.6% on a year-over-year basis.

The company’s quarterly performance was driven by solid organic growth, outstanding revenue improvement from the tuck-in mergers and acquisitions (M&A) and strong margin expansion. Moreover, the company witnessed strong performance across all its segments.

Net profit increased 19.2% year over year to 31 cents per share.

Operational Update

Total revenue was $1.41 billion, up 8.6% year over year. The upside was driven by growth in total adjusted revenue in the Brokerage, Risk Management as well as Corporate segments. Revenues beat the Zacks Consensus Estimate of $1.38 billion.

Total commissions and fees earned increased 6.3% year over year to $961 million in the quarter.

Arthur J. Gallagher’s total expense increased 9.3% year over year to $1.4 billion in the quarter. Expenses escalated due to a rise in compensation costs, interest expenses, cost of revenues from clean coal activities, higher depreciation and amortization expenses and change in estimated acquisition earnout payables.

Earnings before interest, tax, depreciation and amortization (EBITDAC) increased 10.9% to $187.8 million.

Segment Results

Brokerage: Adjusted revenues of $877.1 million grew 8.4% year over year on higher commissions. Total expense increased 4.9% year over year to $760.8 million.

Adjusted EBITDAC climbed 14% to $215.7 million.

Risk Management: Adjusted revenues were up 1.6% year over year to $182.6 million due to higher fees. Total expense increased 2.8% year over year to $159.7 million.

Adjusted EBITDAC fell 2.5% year over year to $31.2 million.

Corporate: Total revenue came in at $351.6 million, up 18.9% year over year. Total expense increased 20.9% year over year to $439.9 million.

EBITDAC was a loss of $41.7 million, wider than a loss of $33.7 million in the prior-year quarter.

Financial Update

As of Mar 31, 2017, total assets were $11.8 billion, up 2.5% from $11.5 billion at year-end 2016.

Cash and cash equivalents at the end of the quarter increased 3.4% to $564 million from year-end 2016.

Shareholders’ equity increased approximately 2% from the 2016-end level to $3.7 billion at the end of the quarter.

Acquisition Update

In the first quarter, the company closed 12 acquisitions with annualized revenues of over $62.5 million.

Zacks Rank

Currently, Arthur J. Gallagher carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (NYSE:PGR) , The Travelers Companies, Inc. (NYSE:TRV) and RLI Corp. (NYSE:RLI) missed their respective Zacks Consensus Estimate.

Zacks' Hidden Trades

While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?

Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.

Click here for Zacks' secret trade>>