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Brown & Brown, Inc. Just Beat Earnings Expectations: Here's What Analysts Think Will Happen Next

Brown & Brown, Inc. (NYSE:BRO) just released its latest quarterly results and things are looking bullish. It was overall a positive result, with revenues beating expectations by 4.4% to hit US$674m. Brown & Brown reported statutory earnings per share (EPS) US$0.47, which was a notable 13% above what the analysts had forecast. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

View our latest analysis for Brown & Brown

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Taking into account the latest results, the consensus forecast from Brown & Brown's eight analysts is for revenues of US$2.76b in 2021, which would reflect a solid 8.5% improvement in sales compared to the last 12 months. Per-share earnings are expected to increase 5.9% to US$1.72. In the lead-up to this report, the analysts had been modelling revenues of US$2.70b and earnings per share (EPS) of US$1.64 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.

Althoughthe analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$48.22, suggesting that the forecast performance does not have a long term impact on the company's valuation. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. Currently, the most bullish analyst values Brown & Brown at US$55.00 per share, while the most bearish prices it at US$45.00. Even so, with a relatively close grouping of estimates, it looks like the analysts are quite confident in their valuations, suggesting Brown & Brown is an easy business to forecast or the the analysts are all using similar assumptions.

These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Brown & Brown's past performance and to peers in the same industry. We can infer from the latest estimates that forecasts expect a continuation of Brown & Brown'shistorical trends, as next year's 8.5% revenue growth is roughly in line with 9.3% annual revenue growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 4.7% next year. So it's pretty clear that Brown & Brown is forecast to grow substantially faster than its industry.

The Bottom Line

The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Brown & Brown's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. The consensus price target held steady at US$48.22, with the latest estimates not enough to have an impact on their price targets.

With that in mind, we wouldn't be too quick to come to a conclusion on Brown & Brown. Long-term earnings power is much more important than next year's profits. We have forecasts for Brown & Brown going out to 2022, and you can see them free on our platform here.

It is also worth noting that we have found 2 warning signs for Brown & Brown that you need to take into consideration.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com.

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