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Summary

  • AJG achieved increases in revenue and EBITDAC for Q2.
  • This confirms my opinion that AJG will perform well due to organic growth and acquisitions.
  • I didn't make any predictions regarding Q2 earnings in my original article, but the results are consistent with my positive outlook on the company.

I wrote about Arthur J. Gallagher (NYSE:AJG) about three weeks ago in a PRO article that is still available to all readers for about another week before it becomes exclusive to paid PRO subscribers. The company reported positive Q2 earnings results this week which reinforces my bullish stance on the stock. Although I didn't make any predictions regarding the Q2 earnings report, the results show how AJG is growing successfully organically and through mergers and acquisitions.

Total revenue increased 51% year-over-year to $1.18 billion, while adjusted EBITDAC increased 38% to $213 million. Adjusted EBITDAC margin increased from 26.9% in Q2 2013 to 28.8% in Q2 2014. Organic growth for the quarter increased for all operating units by 4.4%. The brokerage contingent commissions increased by 9.7%. The brokerage supplemental commissions increased by 9.1% and the brokerage base commissions and fees increased by 3.1%. The risk management organic growth increased by 7.1%. This demonstrates that AJG is achieving healthy organic growth in addition to its acquisitions.

AJG completed 17 acquisitions during the quarter. The company has a track record of being an aggressive acquirer with 28 years of M&A experience. The company has a knack for not only acquiring many companies in short periods of time, but creating a synergy so that AJG and the acquired companies are stronger together as compared to operating on their own independently. I would expect the company and the stock to perform well over the long term.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.