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Brown & Brown (BRO) Q3 Earnings & Revenues Beat, Rise Y/Y

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Brown & Brown (BRO) Q3 Earnings & Revenues Beat, Rise Y/Y

Brown & Brown's (BRO) Q3 reflects strong organic revenue growth, supported by increase in commissions and fees.

Brown & Brown, Inc. BRO reported third-quarter 2018 earnings of 38 cents per share, beating the Zacks Consensus Estimate by 11.7%. Also, the bottom line improved nearly 41% year over year.

Brown & Brown, Inc. Price, Consensus and EPS Surprise

Brown & Brown, Inc. Price, Consensus and EPS Surprise | Brown & Brown, Inc. Quote

The quarter witnessed strong organic revenue growth supported by an increase in commissions and fees. Though expenses increased, the bottom line benefited from low tax incidence.

Behind the Headlines

Adjusted revenues amounted to $530.9 million, outperforming the Zacks Consensus Estimate by 4.6%. Moreover, the top line rose 11.6% year over year, riding on higher commissions and fees plus net investment income. Organic revenue growth was 1.4% in the reported quarter.

Commissions and fees grew 11.6% year over year to $472 million.

Investment income soared 60% year over year to $0.8 million.

Total expenses increased 10.6% to $388.4 million, driven by a rise in employee compensation and benefits as well as other operating expenses.

Net income before interest, income taxes, depreciation, amortization and a change in estimated acquisition earn-out payables (EBITDAC) were $178 million, up 11.8% year over year. EBITDAC margin was flat year over year at 33.5%.

Financial Update

Brown & Brown exited the third quarter with cash and cash equivalents of $724.7 million, down 12.1% from the 2017-end level.

Long-term debt of $832.4 million as of Sep 30, 2018 was down 2.8% from the level at 2017 end.

Net cash provided by operating activities for nine months ending Sep 30, 2018, came in at $355.5 million, up 13.4% from the same period in 2017.

Adoption of New Accounting Standard

On Jan 1, 2018, Brown & Brown adopted FASB Accounting Standards Update No. 2014-09, ‘Revenue from Contracts with Customers (Topic 606)’ and Accounting Standards Codification (Topic 340) — Other Assets and Deferred Cost. This hurt the top line by $24.5 million and the bottom line by 6 cents in the quarter under review.

Zacks Rank

Brown & Brown has a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Among other players from the insurance industry having reported third-quarter earnings so far, the bottom line of The Progressive Corporation PGR and MGIC Investment Corporation MTG beat the respective Zacks Consensus Estimate while that of RLI Corp. RLI missed the same.

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