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Why Is Brown & Brown (BRO) Up 6.3% Since Last Earnings Report?

A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have added about 6.3% 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 the most recent earnings report in order to get a better handle on the important catalysts.

Brown & Brown's Q3 Earnings Beat, Revenues Rise Y/Y

Brown & Brown, Inc.’s third-quarter 2023 adjusted earnings of 71 cents per share beat the Zacks Consensus Estimate by 16.4%. The bottom line increased 42% year over year.

The quarterly results reflected stronger organic growth, improved EBITDAC margin and higher net investment income, partly offset by higher expenses.

Q3 Details

Total revenues of $1.06 billion beat the Zacks Consensus Estimate by 3.8%. The top line improved 15.1% year over year. The upside can be primarily attributed to commission and fees, which grew 13.4% year over year to $1.04 billion. Our estimate for commission and fees growth was 8.7%.

Organic revenues improved 9.6% to $1 billion in the quarter under review.
Investment income increased year over year to $16.6 million from $1.2 million in the year-ago quarter. The Zacks Consensus Estimate for the metric was pegged at $7.2 million and our estimate was $2.4 million.

Adjusted EBITDAC was $370.3 million, up 27% year over year. EBITDAC margin expanded 350 basis points (bps) year over year to 34.7%. Our estimate for adjusted EBITDAC was $314.5 million.

Total expenses increased 16.3% to $825.4 million due to a rise in employee compensation and benefits and interest expenses. Our estimate was $787.9 million.

Financial Update

Brown & Brown exited the third quarter with cash and cash equivalents of $755.7 million, up 16.2% from the 2022-end level. Long-term debt was $3.1 billion as of Sep 30, 2023, down 14.8% from 2022 end. Net cash provided by operating activities in the first nine months of 2023 was $704.1 million, up 17.4% year over year.

How Have Estimates Been Moving Since Then?

Since the earnings release, investors have witnessed an upward trend in fresh estimates.

VGM Scores

Currently, Brown & Brown has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions has been net zero. 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.

Performance of an Industry Player

Brown & Brown belongs to the Zacks Insurance - Brokerage industry. Another stock from the same industry, Marsh & McLennan (MMC), has gained 5.3% over the past month. More than a month has passed since the company reported results for the quarter ended September 2023.

Marsh & McLennan reported revenues of $5.38 billion in the last reported quarter, representing a year-over-year change of +12.8%. EPS of $1.57 for the same period compares with $1.18 a year ago.

Marsh & McLennan is expected to post earnings of $1.62 per share for the current quarter, representing a year-over-year change of +10.2%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.9%.

Marsh & McLennan has a Zacks Rank #2 (Buy) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

Marsh & McLennan Companies, Inc. (MMC) : Free Stock Analysis Report

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