Brown & Brown BRO is well-poised for growth based on organic initiatives, strategic buyouts and a solid capital position.
Shares of Brown & Brown have rallied 30.6% year to date compared with the industry's growth of 28.4% and the Zacks S&P 500 composite’s rise of 18.6%. The company has seen its estimates for 2019 and 2020 move up nearly 3% and 1.4%, respectively, in the past 60 days, indicating investor optimism on the stock.
The Zacks Consensus Estimate for 2019 and 2020 earnings indicates 13.4% and 7.8% growth, respectively, from the year-ago reported figure. The expected long-term earnings growth is 10%. The company has an impressive Growth Score of B. This style score analyzes the growth prospects for a company. Back-tested results show that stocks with a Growth Score of A or B and a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best investment opportunities.
Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. This has been driving commission and fees that increased at a five-year CAGR of 5.1%. For 2019, the company estimates commissions to grow substantially in Retail. Also, the company expects premium rates to increase slightly across most lines of business in 2019.
The company has a solid history of acquisitions, adding about 500 insurance intermediary operations in more than two decades. In fact, the last year was the biggest ever in terms of acquisition activity as the company added Hays Companies to its portfolio. Brown & Brown estimates Hays to deliver $210 million to $220 million of annual revenues, $47 million to $53 million of EBITDAC and net income per share of 2 cents to 3 cents in 2019. Solid capital and liquidity position should continue to aid the company in making such strategic buyouts driving company’s growth.
Brown & Brown intends to implement a new annual incentive program for its middle-market producers in the Retail division. Also, in collaboration with QBE, the company launched Core Commercial Program, to be licensed in all 50 states, mainly targeting middle-market companies with annual premiums of $0.1 million and below. These should continue to fuel inorganic growth.
Given sustained strong performance, the company engages in effective capital deployment. It has a stellar track record of raising dividend for the last 25 years, currently yielding 0.9%. This apart, the company also has $500 million under its share buyback authorization.
The Zacks Rank #2 insurance broker has a decent history of delivering positive surprise with the average beat being 9.06%.
Other Stocks to Consider
Some other top-ranked property and casualty insurers include Alleghany Y, Hallmark Financial Services HALL and Donegal Group DGICA, each sporting Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany provides property and casualty reinsurance and insurance products in the United States and internationally. The company delivered 30.80% positive surprise in the last reported quarter.
Hallmark Financial underwrites, markets, distributes, and services property/casualty insurance products to businesses and individuals in the United States. The company delivered 20.22% positive surprise in the last reported quarter.
Donegal Group provides personal and commercial lines of property and casualty insurance to businesses and individuals in the Mid-Atlantic, Midwestern, New England, and southern states. The company delivered 160.00% positive surprise in the last reported quarter.
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Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
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