Bullish indicating open at $55-$60, IPO prices at $37
On Tuesday, Keefe, Bruyette & Woods (KBW) updated their financial outlook on Arthur J. Gallagher & Co. (NYSE: AJG), increasing the price target to $308.00 from the previous $295.00. The firm has decided to maintain a Market Perform rating on the company’s shares.
The adjustment comes in the wake of Arthur J. Gallagher’s recent announcement that it will acquire San Francisco-based broker Woodruff Sawyer for $1.2 billion. The transaction, which is valued at 13.6 times Woodruff Sawyer’s trailing twelve-month EBITDAC (Earnings Before Interest, Taxes, Depreciation, Amortization, and Coronavirus-related impacts), including estimated synergies by AJG, is expected to close in the second quarter of 2025. With a market capitalization of $85.9 billion and robust revenue growth of 14.3% in the last twelve months, AJG continues to demonstrate strong financial performance. InvestingPro subscribers can access detailed analysis of AJG’s growth metrics and 12 additional exclusive insights about the company.
KBW’s analyst noted that the acquisition price was not seen as excessively high, despite being above the 11.3 times adjusted EBITDAC that Arthur J. Gallagher disclosed for its pending AssuredPartners acquisition. The analyst believes the deal will contribute positively to the company’s growth and slightly increase fiduciary income, although these benefits may be partly offset by higher interest and banking expenses.
Reflecting the anticipated impact of the acquisition, KBW has raised its cash earnings per share (EPS) estimates for Arthur J. Gallagher for the years 2025 and 2026. The new forecasts are $11.65 and $13.55, up from the previous projections of $11.60 and $13.45, respectively.
The revised price target of $308 reflects a multiple of 22.7 times the updated 2026 estimated cash EPS, according to the analyst at KBW. The Market Perform rating indicates that KBW views the stock as expected to perform in line with the average returns of the companies covered in the industry over the next 12 months. Trading at a P/E ratio of 51.2x and above its InvestingPro Fair Value estimate, investors should note that AJG maintains strong financial health with a "GOOD" overall score and has consistently paid dividends for 41 consecutive years.
In other recent news, Arthur J. Gallagher & Co. has announced several strategic acquisitions aimed at expanding its global footprint and service offerings. The company has entered into a definitive agreement to acquire Woodruff Sawyer, a San Francisco-based insurance broker, for $1.2 billion, with the transaction expected to close in the second quarter of 2025. Woodruff Sawyer reported pro forma revenues of approximately $268 million and EBITDAC of $88 million for the trailing 12 months ended December 31, 2024. Additionally, Gallagher has acquired New Zealand-based RMA General Limited, although the financial terms remain undisclosed. The acquisition of RMA is expected to enhance Gallagher’s service offerings in New Zealand.
Furthermore, Gallagher has expanded its presence in the Upper Midwest by acquiring Dyste Williams, a Minneapolis-based retail insurance agency. This acquisition is aligned with Gallagher’s strategy to strengthen its small business capabilities. In Brazil, Gallagher has acquired the Case Group, a firm specializing in employee and health benefits solutions, to bolster its operations in Latin America. Lastly, Gallagher has acquired Agilis Partners LLC, a Massachusetts-based investment and retirement plan consulting firm, to enhance its retirement plan and investment consulting capabilities. These acquisitions reflect Gallagher’s ongoing strategy to grow its presence and capabilities in key markets globally.
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