UPDATE: Compass Point Downgrades Arthur J. Gallagher & Co. to Neutral, Reiterates $50 PT Following Slight 3Q13 Earnings Miss

In a report published Thursday, Compass Point analyst Ken Billingsley downgraded the rating on

from Buy to Neutral, but reiterated the $50.00 price target. In the report, Compass Point noted, “3Q13 earnings came in a bit light of consensus as operating margins did not improve as much as expected, and more importantly, the expected favorable net impact from the clean coal investment was lower than expected as operating costs ran higher than modeled. Our earnings estimates have built in expectations for margin improvement going forward but have increased operating expense costs associated with the clean coal operations. Our EPS estimates could increase if operating margins within both the brokerage and risk management segments improve to a greater degree than expected following recent acquisitions. In addition, the clean energy segment could surprise and generate a sizable boost to earnings. We estimate that the clean coal tax credit added $0.20 per share to 3Q13 earnings and represented approximately 36% of earnings. If brokerage operation margins don't increase from current levels following recent acquisitions, we expect the contribution to earnings from clean coal tax credits to increase. We are lowering AJG to Neutral while maintaining our $50 price target.” Arthur J. Gallagher & Co. closed on Wednesday at $47.50.