Why Is Brown & Brown (BRO) Down 1.1% Since Last Earnings Report?
A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have lost about 1.1% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Brown & Brown due for a breakout? 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 drivers.
Brown & Brown's Q2 Earnings & Revenues Top Estimates
Brown & Brown second-quarter 2023 adjusted earnings of 68 cents per share beat the Zacks Consensus Estimate by 15.2%. The bottom line increased 33.3% year over year.
The quarterly results reflected improved organic growth and higher net investment income, partly offset by higher expenses.
Q2 Details
Total revenues of $1.1 billion beat the Zacks Consensus Estimate by 5.1%. The top line improved 25% year over year. The upside can be primarily attributed to commission and fees, which grew 23.5% year over year to $1 billion. Our estimate for commission and fees growth was 13.7%.
Organic revenues improved 11.2% to $894.3 million in the quarter under review.
Investment income increased year over year to $10.3 million from $0.4 million in the year-ago quarter. The Zacks Consensus Estimate for the metric was pegged at $6.1 million and our estimate was $4.6 million.
Adjusted EBITDAC was $358.4 million, up 30.5% year over year. EBITDAC margin expanded 150 basis points year over year to 35.7%. Our estimate for adjusted EBITDAC was $207.5 million.
Total expenses increased 23.7% to $792.9 million due to a rise in employee compensation and benefits, other operating expenses, amortization, depreciation and interest expenses. Our estimate was $751.3 million.
Financial Update
Brown & Brown exited the second quarter with cash and cash equivalents of $ 627.9 million, down 3.4% from the 2022-end level.
Long-term debt was $3.8 billion as of Mar 31, 2023, up 1.9% from 2022 end.
Net cash provided by operating activities in the first half of 2023 was $388.5 million, up 12.2% year over year.
Dividend Update
The board of directors paid a regular quarterly cash dividend of 11.50 cents per share in the reported quarter.
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 9.41% due to these changes.
VGM Scores
At this time, Brown & Brown has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Following the exact same course, the stock was allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. 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 looks promising. It comes with little surprise Brown & Brown has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.
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Brown & Brown, Inc. (BRO) : Free Stock Analysis Report
