Arthur J. Gallagher & Co. (NYSE:AJG) recently reported second-quarter 2017 adjusted net earnings of $1.03 per share, which beat the Zacks Consensus Estimate by about 1%. Also, the bottom line improved 7.3% 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 a strong margin expansion. The company also witnessed a strong performance across all its segments.
Net profit increased 13.1% year over year to 95 cents per share.
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise
Arthur J. Gallagher & Co. Price, Consensus and EPS Surprise | Arthur J. Gallagher & Co. Quote
Operational Update
Total revenue was $1.6 billion, up 9.6% 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 $1.5 billion.
Total commissions and fees earned increased 6.1% year over year to $1.1 billion in the quarter.
Arthur J. Gallagher’s total expense increased 9.8% year over year to $1.4 billion in the quarter. Expenses escalated due to a rise in compensation costs, operating costs, interest expenses, cost of revenues from clean coal activities, plus higher depreciation and amortization expenses.
Earnings before interest, tax, depreciation and amortization (EBITDAC) increased 4.7% to $279.0 million.
Segment Results
Brokerage: Adjusted revenues of $997.0 million grew 8.8% year over year on higher commissions. Total expense increased 3.2% year over year to $785.6 million.
Adjusted EBITDAC climbed 10.6% to $309.2 million.
Risk Management: Adjusted revenues were up 7.3% year over year to $188.7 million due to higher fees. Total expense increased 7.6% year over year to $165.8 million.
Adjusted EBITDAC rose 8.1% year over year to $32.1 million.
Corporate: Total revenue came in at $351.6 million, up 20.9% year over year. Total expense escalated 24.1% year over year to $465.0 million.
EBITDAC was at a loss of $42.1 million, wider than a loss of $25.4 million in the prior-year quarter.
Financial Update
As of Jun 30, 2017, total assets were $12.6 billion, up 9.4% from $11.5 billion at year-end 2016.
Cash and cash equivalents at the end of the quarter increased 7.8% to $587.8 million from year-end 2016.
Shareholders’ equity increased approximately 7% from the 2016-end level to $3.9 billion at the end of the quarter.
Acquisition Update
In the second quarter, the company closed nine acquisitions with annualized revenues of over $30.3 million.
Zacks Rank
Currently, Arthur J. Gallagher carries a Zacks Rank #4 (Sell).
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 second-quarter earnings so far, the bottom line at The Progressive Corporation (NYSE:PGR) and The Travelers Companies, Inc. (NYSE:TRV) missed their respective Zacks Consensus Estimate, while RLI Corp. (NYSE:RLI) beat the same.
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Arthur J. Gallagher & Co. (AJG): Free Stock Analysis Report
RLI Corp. (RLI): Free Stock Analysis Report
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
Progressive Corporation (The) (PGR): Free Stock Analysis Report
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