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Truist Securities downgraded Arthur J. Gallagher (NYSE:AJG) stock to Hold from Buy on Wednesday as analyst Mark Hughes sees increased potential for a "sharper downshift" in the P&C insurance cycle, citing recent industry data.
That, in turn, would "have a knock-on effect on organic growth and valuation for AJG, which is more at risk because of its premium multiple," Hughes wrote in a note.
The analyst said his downgrade reflects his macro call instead of any negative view on company-specific fundamentals, noting AJG "has been an excellent performer, both in terms of operations and stock performance."
However, "the sharp turn in the E&S data and the confirming MarketScout survey point to increased risk of cyclical erosion, which would, in turn, dampen the opportunity for outperformance in coming periods," the note said.
His Hold rating agrees with the SA Quant system rating and diverges from the average sell-side analyst rating of Buy.
AJG dipped 1.9% in afternoon trading.
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