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It has been about a month since the last earnings report for Brown & Brown (BRO). Shares have added about 2.7% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Brown & Brown due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.
Brown & Brown Q3 Earnings & Revenues Beat, Up Y/Y
Brown & Brown reported third-quarter 2020 earnings of 52 cents per share, which beat the Zacks Consensus Estimate by 23.8%. The bottom line surged 33.3% year over year.
The results reflect improved organic growth and margin expansion.
Behind the Headlines
Adjusted revenues of $674 million beat the Zacks Consensus Estimate by 4.8%. Moreover, the top line rose 8.9% year over year on higher commissions and fees. Organic revenues increased 4.3% in the reported quarter.
Commissions and fees grew 8.7% year over year to $671.4 million.
Investment income plunged 76.5% year over year to $0.4 million.
Total expenses increased 10.4% to $515.5 million due to a rise in employee compensation and amortization and depreciation.
EBITDAC was $220.8 million, up 13.2% year over year. EBITDAC margin expanded 130 basis points (bps)
Brown & Brown exited the third quarter with cash and cash equivalents of $1.5 billion, up about 56% from 2019-end level.
Long-term debt of $2 billion as of Sep 30, 2019 was up 36.5% from 2019 end.
Net cash provided by operating activities in the first nine months of 2020 was $539.6 million, up 20.7% year over year.
The company paid cash dividend of 8.5 cents per share in the third quarter. to 32.8%.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision. The consensus estimate has shifted 7.69% due to these changes.
At this time, Brown & Brown has a nice Growth Score of B, a grade with the same score on the momentum front. However, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Brown & Brown has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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