Arthur J. Gallagher (AJG) Rides On Strong Brokerage Segment

Arthur J. Gallagher & Co. (NYSE:AJG) has been consistently benefitting from organic growth in revenues and strong capital position. Its Brokerage segment is gaining momentum on several initiatives.

The segment has been contributing a major portion of the company’s revenues consistently. Notably, the segment accounted for 61% and 68% of Arthur J. Gallagher’s total revenues in 2018 and 2019, respectively. Also, the segment’s organic growth witnessed a rise of 5.8% year over year in 2019 and continues to drive the company’s top-line number.

Arthur J. Gallagher seems to be in a bid to boost revenues in its Brokerage segment on several initiatives. Recently, it collaborated with Special Olympics to offer superior quality training programs for disabled athletes across the globe. This year, the company also announced the acquisition of insurance broker CMS and Affiliated Benefit Consultants. All these initiatives are aimed at enhancing the brokerage services of the company.

Moreover, the Corporate segment is performing well on increased clean-energy investments. It accounted for 25% and 18% of the company’s top line in 2018 and 2019, respectively. Currently riding on strong demand for claim settlement and administration services, its Risk Management segment contributed 14% to the company’s top-line growth over the past two years.

Strong segmental performance combined with Arthur J. Gallagher’s continuous efforts to diversify products and operations led to solid top-line growth, which is evident from the CAGR of 3.7% witnessed in the last five years (2014-2019). We believe that the company is well-positioned for long-term growth, attributable to its efforts of increasing international contribution to its top line.

Furthermore, Arthur J. Gallagher boasts a robust capital position banking on which it returns value to shareholders via dividend payments. In January 2020, it raised its quarterly dividend by 4.7%. Strong operational environment also aided in generating substantial cash flows for the company.

Banking on such growth prospects, shares of the Zacks Rank #3 (Hold) brokerage firm have gained 20.1% in a year compared with the industry’s growth of 13.3%.

Stocks to Consider

Some better-ranked stocks from the same space are eHealth, Inc. (NASDAQ:EHTH) , Brown & Brown, Inc. (NYSE:BRO) and Aon plc (NYSE:AON) . While eHealth currently sports a Zacks Rank #1 (Strong Buy), Brown & Brown and Aon plc carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

eHealth, Brown & Brown and Aon beat the Zacks Consensus Estimate in the last reported quarter by 65.86%, 3.7% and 1.61%, respectively.

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