Arthur J. Gallagher & Co. Just Missed Earnings - But Analysts Have Updated Their Models

Arthur J. Gallagher & Co. (NYSE:AJG) shareholders are probably feeling a little disappointed, since its shares fell 2.3% to US$283 in the week after its latest quarterly results. Revenues were in line with forecasts, at US$2.8b, although statutory earnings per share came in 15% below what the analysts expected, at US$1.39 per share. Earnings are an important time for investors, as they can track a company's performance, look at what the analysts are forecasting for next year, and see if there's been a change in sentiment towards the company. We've gathered the most recent statutory forecasts to see whether the analysts have changed their earnings models, following these results.

See our latest analysis for Arthur J. Gallagher

After the latest results, the nine analysts covering Arthur J. Gallagher are now predicting revenues of US$12.7b in 2025. If met, this would reflect a meaningful 19% improvement in revenue compared to the last 12 months. Statutory earnings per share are predicted to bounce 58% to US$8.43. In the lead-up to this report, the analysts had been modelling revenues of US$12.8b and earnings per share (EPS) of US$8.50 in 2025. So it's pretty clear that, although the analysts have updated their estimates, there's been no major change in expectations for the business following the latest results.

It will come as no surprise then, to learn that the consensus price target is largely unchanged at US$293. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. There are some variant perceptions on Arthur J. Gallagher, with the most bullish analyst valuing it at US$320 and the most bearish at US$250 per share. With such a narrow range of valuations, the analysts apparently share similar views on what they think the business is worth.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. It's clear from the latest estimates that Arthur J. Gallagher's rate of growth is expected to accelerate meaningfully, with the forecast 15% annualised revenue growth to the end of 2025 noticeably faster than its historical growth of 9.5% p.a. over the past five years. Compare this with other companies in the same industry, which are forecast to grow their revenue 5.1% annually. It seems obvious that, while the growth outlook is brighter than the recent past, the analysts also expect Arthur J. Gallagher to grow faster than the wider industry.

The Bottom Line

The most obvious conclusion is that there's been no major change in the business' prospects in recent times, with the analysts holding their earnings forecasts steady, in line with previous estimates. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. The consensus price target held steady at US$293, with the latest estimates not enough to have an impact on their price targets.

Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. We have forecasts for Arthur J. Gallagher going out to 2026, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 3 warning signs for Arthur J. Gallagher that you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.