What’s in Store for Arthur J. Gallagher (AJG) in Q4 Earnings?

Arthur J. Gallagher & Co. AJG is slated to report fourth-quarter 2022 earnings on Jan 26, after market close. The insurer delivered an earnings surprise in each of the last four reported quarters, the average being 2.75%.

Factors to Consider

Arthur J. Gallagher’s fourth-quarter results are expected to reflect new business, strong retention and renewal premium increases across its business lines.

Revenues associated with acquisitions, organic revenue growth, organic change in base commission and fee revenues are likely to have favored commission and fee revenues in the fourth quarter of 2022. The Zacks Consensus Estimate for fees is pegged at $631 million, indicating an increase of 11.1% from the prior-year period’s reported number. The consensus mark for commissions stands at $1.1 billion, implying 13.6% growth from the prior-year period’s reported number.
We estimate fees of $589.4 million and commission of $1.1 billion in the to-be-reported quarter.

The employee benefit brokerage and consulting business is likely to have been aided by improving domestic labor market conditions.  

Arthur J. Gallagher estimates organic revenue growth from existing clients, growing claim counts and new business to have favored Brokerage and Risk Management segments.

Improved interest rates and increases in income from partially-owned entities accounted for using the equity method are likely to have benefited net investment income. We expect investment income of $39.5 million in the to-be-reported quarter. The Zacks Consensus Estimate for net investment income is pegged at $37.8 million.

Organic commission, fee, supplemental revenues, contingent revenues, investment income as well as strategic mergers and acquisitions are likely to have driven the top line in the to-be-reported quarter. We expect revenues of $1.9 billion in the to-be-reported quarter.

Total expenses are likely to have increased mainly because of higher compensation and operating cost, higher cost of revenues from clean coal activities, increased amortization and change in estimated acquisition earnout payables. We expect total expense of $1.6 billion in the to-be-reported quarter.

The Zacks Consensus Estimate for fourth-quarter earnings per share stands at $1.50, indicating an increase of 53% from the year-ago  reported figure.

What the Zacks Model Says

Our proven model does not conclusively predict an earnings beat for Arthur J. Gallagher this time around. This is because a stock needs to have the right combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) that increases the odds of an earnings beat. This is not the case here.

Earnings ESP: Arthur J. Gallagher has an Earnings ESP of -2.76%. This is because the Most Accurate Estimate of $1.46 is pegged lower than the Zacks Consensus Estimate of $1.50. 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-eps-surprise | Arthur J. Gallagher & Co. Quote

Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #3 currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Stocks to Consider

Some insurance stocks with the right combination of elements to come up with an earnings beat this time around are:

Aon plc AON has an Earnings ESP of +1.52% and a Zacks Rank of 2. The Zacks Consensus Estimate for fourth-quarter 2022 earnings is pegged at $3.67, indicating a decrease of 1.08% from the year-ago reported figure.

AON’s earnings beat estimates in three of the last four reported quarters, while missing in one.

Marsh & McLennan Companies, Inc. MMC has an Earnings ESP of +0.36% and a Zacks Rank #2. The Zacks Consensus Estimate for fourth-quarter 2022 earnings is pegged at $1.40, indicating an increase of 2.9% from the year-ago reported figure.

MMC’s earnings beat estimates in the last four reported quarters.

Prudential Financial, Inc. PRU has an Earnings ESP of +5.92% and a Zacks Rank of 2. The Zacks Consensus Estimate for fourth-quarter 2022 earnings is pegged at $2.77, indicating a decrease of 12.8% from the year-ago reported figure.

PRU’s earnings beat estimates in two of the last four reported quarters, while missing in the other two.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.

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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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