Arthur J. Gallagher (AJG) Q2 Earnings: What's In Store?

Arthur J. Gallagher & Co. (NYSE:AJG) is slated to report second-quarter 2017 results on Jul 27, after the market closes. Last quarter, the company delivered a positive earnings surprise of 2.56%. Let’s see how things are shaping up for this announcement.

Factors to be Considered this Quarter

Arthur J. Gallagher is likely to report bottom-line growth in the second quarter, mainly due to a solid performance by both its Brokerage and Risk Management businesses. Furthermore, the insurance broker is likely to register top-line growth on the back of organic sales as well as strategic mergers and acquisitions (M&A).

The company is also likely to report organic growth in its Brokerage segment in the second quarter. In addition, the insurance broker is expected to increase its EBITDAC margin in the soon-to-be-reported quarter.

Further, Arthur J. Gallagher’s employee benefit consulting operations are likely to have registered organic growth owing to new business opportunities.

However, increasing expenses, primarily due to higher compensation and operating costs, are likely to have weighed on margin expansion.

With respect to the surprise trend, the company delivered positive surprises in three of the last four quarters with an average beat of 1.23%.

Earnings Whispers

Our proven model does not conclusively show that Arthur J. Gallagher is likely to beat on earnings this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below.

Zacks ESP: Arthur J. Gallagher has an Earnings ESP of +0.98%. This is because the Most Accurate estimate is pegged at $1.03, higher than the Zacks Consensus Estimate of $1.02. You can uncover the best stocks to buy or sell before they are reported with our Earnings ESP Filter.

Zacks Rank: Arthur J. Gallagher carries a Zacks Rank #4 (Sell).

Note, that we caution against all Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Some better-ranked companies from the insurance industry with the right combination of elements to come up with an earnings beat this quarter are as follows:

CNA Financial Corporation (NYSE:CNA) , which is set to report its second-quarter earnings on Jul 31, has an Earnings ESP of +4.00% and a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

Sun Life Financial Inc. (TO:SLF) has an Earnings ESP of +2.74% and a Zacks Rank #2. The company is set to report its second-quarter earnings on Aug 9.

Manulife Financial Corporation (NYSE:MFC) has an Earnings ESP of +10.00% and a Zacks Rank #1. The company is slated to report its second-quarter earnings on Aug 9.

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