On Friday, TD Cowen analyst Andrew Kligerman upgraded shares of Arthur J. Gallagher & Co. (NYSE:AJG) to Buy from Hold, setting a new price target of $377.00, up from $295.00. The upgrade follows Arthur J. Gallagher’s recent announcement that it will acquire AssuredPartners (AP) for $13.4 billion. Kligerman noted that the deal’s valuation of 14.3 times trailing twelve months (TTM) EBITDA, or 13.3 times after accounting for deferred tax assets (DTA), is attractive.
Arthur J. Gallagher’s stock price is anticipated to benefit from the transaction, with Kligerman estimating a roughly 10% earnings per share (EPS) accretion for the year 2025. The analyst also pointed out that the stock is currently trading at 20 times projected 2026 EPS, and believes it could potentially increase to 23-25 times plus DTA value.
According to InvestingPro data, AJG currently trades at a P/E ratio of 52.87, and analysts maintain a positive outlook with price targets ranging from $250 to $344. The stock has demonstrated strong momentum with a 25.15% return over the past year.
The acquisition of AssuredPartners, which has a mid-market focus, is seen as a strategic fit for Arthur J. Gallagher. Kligerman highlighted that while other brokers might find the integration challenging, Arthur J. Gallagher’s proven track record of integrating small to mid-sized market brokers gives it a competitive edge. This capability allowed the company to act decisively in acquiring AP at a post-DTA EBITDA multiple of 13 times, which is considered attractive by the analyst.
Kligerman contrasted Arthur J. Gallagher’s deal with recent transactions by competitors such as AON and Marsh & McLennan Companies (MMC), who have been preoccupied with their own acquisitions—NFP and McGriff, respectively—both of which were purchased at higher EBITDA multiples in the upper teens. The implication is that Arthur J. Gallagher has managed to secure a better value deal compared to its competitors.
The upgrade by TD Cowen underscores a positive outlook for Arthur J. Gallagher’s stock following its strategic acquisition, with the potential for significant EPS growth and an increase in stock valuation as key points of interest for investors. InvestingPro subscribers can access 10+ additional exclusive insights about AJG, including its impressive 14-year dividend growth streak and comprehensive financial health analysis.
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In other recent news, Arthur J. Gallagher & Co. has been making strategic acquisitions to bolster its presence across the United States and Canada.
The company recently acquired Encore Group, Afina Insurance Advisors Inc., Durham & Bates Agencies, Inc., M.J. Schuetz Insurance Services Inc., and AssuredPartners, enhancing its capabilities in key sectors and regions. These moves are part of the company’s ongoing strategy to expand its market presence and enhance its service offerings.
The company also issued $5 billion in senior notes, a significant financial maneuver aimed at supporting its strategic initiatives. On the financial front, Arthur J. Gallagher reported a 13% increase in revenue across its Brokerage and Risk Management segments. Analyst firms such as BMO Capital, Keefe, Bruyette & Woods, and Truist Securities have projected organic growth in these segments for the year 2025.
Following the AssuredPartners 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 Arthur J. Gallagher, with the former raising it to $292 and the latter maintaining it at $275.
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