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Brown & Brown, Inc. Just Recorded A 20% EPS Beat: Here's What Analysts Are Forecasting Next

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Simply Wall St
·4 min read
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Brown & Brown, Inc. (NYSE:BRO) investors will be delighted, with the company turning in some strong numbers with its latest results. Brown & Brown beat earnings, with revenues hitting US$599m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 20%. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Brown & Brown


Taking into account the latest results, Brown & Brown's eight analysts currently expect revenues in 2020 to be US$2.47b, approximately in line with the last 12 months. Statutory earnings per share are expected to reduce 6.9% to US$1.44 in the same period. Before this earnings report, the analysts had been forecasting revenues of US$2.47b and earnings per share (EPS) of US$1.44 in 2020. The consensus analysts don't seem to have seen anything in these results that would have changed their view on the business, given there's been no major change to their estimates.

With the analysts reconfirming their revenue and earnings forecasts, it's surprising to see that the price target rose 8.1% to US$45.30. It looks as though they previously had some doubts over whether the business would live up to their expectations. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Brown & Brown analyst has a price target of US$50.00 per share, while the most pessimistic values it at US$38.00. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.

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. It's pretty clear that there is an expectation that Brown & Brown's revenue growth will slow down substantially, with revenues next year expected to grow 0.4%, compared to a historical growth rate of 8.6% over the past five years. Compare this against other companies (with analyst forecasts) in the industry, which are in aggregate expected to see revenue growth of 4.0% next year. So it's pretty clear that, while revenue growth is expected to slow down, the wider industry is also expected to grow faster than Brown & Brown.

The Bottom Line

The most important thing to take away is that there's been no major change in sentiment, with the analysts reconfirming that the business is performing in line with their previous earnings per share estimates. Fortunately, the analysts also reconfirmed their revenue estimates, suggesting sales are tracking in line with expectations - although our data does suggest that Brown & Brown's revenues are expected to perform worse than the wider industry. We note an upgrade to the price target, suggesting that the analysts believes the intrinsic value of the business is likely to improve over time.

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 estimates - from multiple Brown & Brown analysts - going out to 2024, and you can see them free on our platform here.

You should always think about risks though. Case in point, we've spotted 1 warning sign for Brown & Brown you should be aware of.

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.

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