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Arthur J. Gallagher (AJG) Q1 Earnings Beat, Revenues Miss

Arthur J. Gallagher & Co. AJG reported first-quarter 2016 adjusted net earnings of 34 cents per share that surpassed the Zacks Consensus Estimate of 29 cents by 17.2%. The bottom line also improved 25.9% year over year.

Net profit of 26 cents in the quarter doubled year over year.

The company’s outperformance was driven by strong performance by the Brokerage and Risk Management segments and an improvement in margins.

Operational Update

Total revenue amounted to $1.3 billion, up 8.3% year over year. The upside was driven by an 11% growth in total adjusted revenues from Brokerage and Risk Management segments. However, revenues missed the Zacks Consensus Estimate by 3.3.

Total commissions and fees earned improved 4.8% year over year to $745.4 million in the quarter.

Arthur J. Gallagher & Co.’s total expense increased 3.6% year over year to $1.2 billion in the quarter. The increase in expenses stemmed from a rise in compensation cost, operating expenses and amortization.

Segment Results

Brokerage: The segment reported adjusted revenues of $823.3 million, up 12% year over year. The improvement was driven by a 4.8% increase in organic growth with higher Base commissions and Fees, Supplemental commissions and Contingent commissions.

Total expense increased 5.1% year over year to $725.5 million.

Earnings before interest, tax, depreciation and amortization (EBITDAC) improved 16% to $191.2 million.

Risk Management: Total adjusted revenue amounted to $179.3 million, up 3% year over year. Also, organic fees rose 4.7% year over year.

Total expense increased 1.1% year over year to $155.3 million.

Adjusted EBITDAC rose 9% year over year to $31.5 million.

Corporate

Total adjusted revenue amounted to $295.6 million, down 2.4% year over year.

Total expense increased 2% year over year.

Adjusted EBITDAC came in as a loss of $26.2 million, narrower than a loss of $29.7 million in the prior year.

Financial Update

Total assets as of Mar 31, 2016 amounted to $10.7 billion, down 1.8% from $10.9 billion at year-end 2015.

Cash and cash equivalents in first quarter end decreased 11.4% to $0.42 billion from $0.48 million at the end of 2015.

Shareholders’ equity dipped 1% to $3.6 billion for the quarter ending Mar 31, 2016.

Acquisition Update

During the first quarter, the company closed eight acquisitions with annualized revenues of over $30 million.

Zacks Rank and Performance of Other Players

Arthur J. Gallagher presently carries a Zacks Rank #2 (Buy).

The bottom-line at Aon Plc. AON, Marsh & McLennan MMC and Brown & Brown BRO outperformed their respective Zacks Consensus Estimate in the first quarter.

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MARSH &MCLENNAN (MMC): Free Stock Analysis Report
 
AON PLC (AON): Free Stock Analysis Report
 
BROWN & BROWN (BRO): Free Stock Analysis Report
 
GALLAGHER ARTHU (AJG): Free Stock Analysis Report
 
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