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Why Is Brown & Brown (BRO) Up 3% Since Last Earnings Report?

It has been about a month since the last earnings report for Brown & Brown (BRO). Shares have added about 3% in that time frame, outperforming 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 2021 earnings of 58 cents per share, which beat the Zacks Consensus Estimate by 11.5%. The bottom line increased 11.5% year over year.

Higher commissions and fees drove the company’s results, partly offset by increased expenses.

Behind the Headlines   

Adjusted revenues of $770 million beat the Zacks Consensus Estimate by 1.2%. Moreover, the top line rose 14.2% year over year on higher commissions and fees. Organic revenues increased 8.5% in the reported quarter.

Commissions and fees grew 14.6% year over year to $769.7 million.

Investment income remained unchanged year over year at $0.4 million.

Total expenses increased 11.3% to $573.8 million due to a rise in employee compensation, other operating expenses, amortization, depreciation, interest, and change in estimated acquisition earn-out payables.

EBITDAC was $274.5 million, up 24.3% year over year. EBITDAC margin expanded 280 basis points (bps) to 35.6%.

Financial Update

Brown & Brown exited the third quarter with cash and cash equivalents of $944 million, up about 15.5% from the 2020-end level.

Long-term debt of $1.7 billion as of Sep 30, 2021 was down 13.3% from 2020 end.

Net cash provided by operating activities in the first nine months of 2021 was $627.8 million, up 16.3% year over year.

Dividend Update

The company paid out a cash dividend of 9.3 cents per share in the third quarter.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month.

VGM Scores

At this time, Brown & Brown has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Charting a somewhat similar path, 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 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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Brown & Brown, Inc. (BRO): Free Stock Analysis Report
 
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