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Tuesday, BMO Capital Markets sustained its Outperform rating and $332.00 price target on Arthur J. Gallagher & Co. (NYSE:AJG), a global insurance brokerage and risk management services firm. BMO's analysis suggests a potential shift in the company's organic growth pattern for the year, anticipating a softer first half (1H) and a stronger second half (2H).
The research firm's commentary highlighted that while there are no material changes to the 2025 organic growth outlook of approximately 7%, there could be variations in seasonal growth patterns. BMO estimates that reinsurance, which previously contributed positively to growth, may become less of a driving factor, declining from around 11% in 2024 to about 6% in 2025. With the company's next earnings report scheduled for January 30, InvestingPro subscribers can access over 10 additional exclusive insights and comprehensive financial metrics to better evaluate the company's performance.
BMO's projections include a more conservative first and second quarter organic growth rate, approximately 1 percentage point below consensus, with an expected compensation in the latter half of the year. The base case estimates take into account a decrease in property reinsurance pricing of about 15%. However, BMO cautioned that these estimates could be adjusted if the wildfire season continues with greater intensity.
Arthur J. Gallagher's historical data, prior to the acquisition of Willis Re, indicates a tendency for stronger organic growth trends in the second half of the year, excluding the impact of reinsurance. BMO's analysis points to this historical pattern as a basis for their current outlook on the company's performance throughout the year.
In other recent news, Arthur J. Gallagher & Co. has made notable strides in its expansion efforts through several acquisitions, including Wealth Management Partners in Australia and Encore Group in Canada. The company's growth strategy is further evidenced by its purchase of AssuredPartners, Afina Insurance Advisors Inc., Durham & Bates Agencies, Inc., and M.J. Schuetz Insurance Services Inc. These acquisitions have amplified Arthur J. Gallagher's presence across multiple regions and sectors.
In a significant financial move, Arthur J. Gallagher issued $5 billion in senior notes, aimed at supporting its strategic initiatives. The company has reported a 13% increase in revenue across its Brokerage and Risk Management segments. Analyst firms like BMO Capital, Keefe, Bruyette & Woods, and Truist Securities project organic growth in these segments by 2025.
TD Cowen analyst Andrew Kligerman upgraded Arthur J. Gallagher's stock to 'Buy' following the AssuredPartners acquisition, setting a new price target of $377.00. Post-acquisition, BMO Capital revised its future estimates for Arthur J. Gallagher, including a 5% increase for 2025 and an 8% rise for 2026. Keefe, Bruyette & Woods and Truist Securities also revised their price targets for the company. These are the latest developments in Arthur J. Gallagher's ongoing efforts to strengthen its service offerings and expand its market reach.
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