Benzinga - by Lekha Gupta, Benzinga Editor.
Truist Securities analyst Mark Hughes downgraded Arthur J. Gallagher & Co. (NYSE:AJG) to Hold from Buy and lowered the price target to $255 from $280.
The re-rating is based on the recent industry data points (namely the E&S state results and MarketScout survey), expected to increase the potential for a sharper downshift in the P&C cycle, which would have a knock-on effect on organic growth of the company.
In particular, E&S premium growth decelerated sharply in the first quarter to up 7% (from +20% in the fourth quarter), with a negative result in March (-9%), writes the analyst.
Hughes says that the slowing commercial property growth, including in Florida and Texas, appears to have led certain carriers to push for more casualty premiums at the first quarter-end.
Also, the analyst says that Federal Reserve interest rate cuts, expected to commence later this year, could be a further catalyst away from P&C insurance.
Consequently, Hughes reduced the organic growth assumption by 100 bps for this year and next, slightly pulling back the margin forecast.
The analysis lowered the EPS estimates to $9.90 (from $10.03) vs. consensus of $10.14 and $10.85 (from $11.05) vs. street view of $11.35.
Investors can gain exposure to the stock via Exchange Listed Funds Trust Bancreek U.S. Large Cap ETF (NYSE:BCUS) and Harbor ETF Trust Harbor Dividend Growth Leaders ETF (NYSE:GDIV).
Price Action: AJG shares are down 1.6% at $240.22 on the last check Wednesday.
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Latest Ratings for AJG
| Feb 2022 | Morgan Stanley | Maintains | Equal-Weight | |
| Jan 2022 | Wells Fargo | Maintains | Overweight | |
| Dec 2021 | Raymond James | Maintains | Outperform |
View the Latest Analyst Ratings
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