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Arthur J. Gallagher & Co.’s AJG shares have rallied 33.7% in the past year, outperforming the industry's growth of 28.7%. The Finance sector and the Zacks S&P 500 index have returned 21.6% and 18.5% in the said time frame, respectively. With a market capitalization of $83.62 billion, the average volume of shares traded in the last three months was 2.15 million. Currently priced at $328.33, the stock is slightly below its 52-week high of $333.03.
AJG Outperforms Industry, Sector, S&P
Image Source: Zacks Investment Research
AJG Trading Above 50-Day and 200-Day Moving Averages
The stock is trading above its 50-day and 200-day simple moving averages (SMA) of $298.67 and $284.09, respectively, indicating solid upward momentum. SMA is a widely used technical analysis tool to predict future price trends by analyzing historical price data.
AJG’s Growth Projection Encourages
The Zacks Consensus Estimate for Arthur J. Gallagher’s 2024 earnings per share indicates a year-over-year increase of 14.3%. The consensus estimate for revenues is pegged at $14.91 billion, implying a year-over-year improvement of 31.1%. The consensus estimate for 2025 earnings per share and revenues indicates an increase of 14.8% and 13.1%, respectively, from the 2024 estimates.
Earnings of Arthur J. Gallagher grew 20.4% in the last five years, better than the industry average of 13.7%.
Impressive Earnings Surprise History of AJG
Arthur J. Gallagher’s bottom line surpassed earnings estimates in three of the last four quarters and matched in one, the average being 2.25%.
Factors Acting in Favor of AJG
This Zacks Rank #3 (Hold) insurer remains focused on generating both organic (particularly international) and inorganic growth and is, thus, tapping into growth opportunities worldwide. This, coupled with solid retention and improving renewal premiums across all major geographies and most product lines, bodes well for growth.
AJG expects organic growth of 4% in 2025. about 8% in the fourth quarter of 2024 with 7.5% growth in 2024 in the Brokerage segment. It also expects margin expansion between 90 basis points and 100 basis points at Brokerage in the fourth quarter of 2024. In the Risk Management segment, for 2025, Arthur J. Gallagher estimates organic growth in the 6% to 8% range at the Brokerage segment and margins of around 20.5%.
AJG’s revenues are geographically diversified with strong domestic and international operations. International contributes about one-third of revenues. Given the number and size of its non-U.S. acquisitions, AJG expects international contribution to its total revenues to trend upward.
Its inorganic growth story is impressive. Since Jan. 1, 2002, the company has acquired 725 companies so far. Revenue growth rates generally ranged from 5% to 15% for 2024 acquisitions. The company completed 48 new brokerage mergers, totaling $400 million of estimated annualized revenues in 2024. AJG has a strong merger pipeline of more than 100 companies representing about $1.5 billion of annualized revenues. Of these, 45 term sheets are signed or being prepared, representing about $650 million of annualized revenues.
Banking on its capital position, AJG distributes wealth to shareholders through dividend hikes and share repurchases. In the first quarter of 2025, the dividend was raised by 8.3%, witnessing a six-year CAGR (2020-2025) of 7.6%.
However, Arthur J. Gallagher has been experiencing an increase in expenses due to higher compensation and operating expenses that have been eroding margins.