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Brown and Brown (BRO) Stock Up 24% YTD: More Room for Upside?

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Shares of Brown and Brown Inc. (BRO - Free Report) have gained 23.9% year to date compared with the industry and the Finance sector’s rally of 11.6% and 21.4%, respectively. The Zacks S&P 500 composite has increased 21.8% in the said time frame. With a market capitalization of $16.5 billion, the average volume of shares traded in the last three months was 0.9 million.
 

Zacks Investment Research
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The company boasts five-year total shareholder returns of 205%, much above its peer group and the S&P 500.

Strong segmental performance, strategic buyouts, and solid capital position continue to drive Brown and Brown. It has a solid track record of beating earnings estimates in the last 10 quarters, with the average surprise being 16.77%.

The Zacks Consensus Estimate for 2021 and 2022 earnings has moved up 5.6% and 3.8% respectively, in the past 60 days, reflecting analysts’ optimism.

Will the Bull Run Continue?

The Zacks Consensus Estimate for 2021 indicates a year-over-year improvement of 24.6% on 15.2% higher revenues. The consensus estimate for 2022 indicates a year-over-year improvement of 5.8% on 6.6% higher revenues.

Brown & Brown’s impressive growth is driven by organic and inorganic means across all segments. Improving new business and continued rate increases for most lines of coverage should continue to drive segmental performances. Revenues have witnessed a 10-year CAGR of 10% and exceeded the peer average and the S&P 500.

Brown & Brown intends to make consistent investments in boosting organic growth and margin expansion. It boasts industry-leading margins.

The company estimates rate improvement to continue through 2021, given increased natural disasters and tort liability issues in the United States, among other factors.

Brown & Brown has an impressive inorganic story. In a span of a more than two decades, the company has acquired about 500 insurance intermediary operations.

This Zacks Rank #2 (Buy) insurance broker remains focused on investing in and leveraging technology to improve efficiency.

Brown & Brown has a strong balance sheet by virtue of its solid cash position and low leverage. Its free cash flow witnessed a 10-year CAGR of 9%.

Riding on its solid capital position, it has hiked dividend for straight 27 years, at a five-year CAGR of 9.7% It also has $324.8 million remaining under its existing share repurchase authorization.

Brown and Brown has a favorable Growth Score of B. This style score analyzes the growth prospects of a company. Back-tested results have shown that for stocks with a solid Growth Score and a favorable Zacks Rank, the returns are even better.

Other Stocks to Consider

Some other top-ranked stocks include Willis Towers Watson Public Limited Company , Aon plc (AON - Free Report) , and Marsh & McLennan Companies (MMC - Free Report) .

Willis Towers delivered an earnings surprise of 34.34% in the last reported quarter. It sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Aon delivered an earnings surprise of 27.22% in the last reported quarter. It carries a Zacks Rank #2.

Marsh & McLennan delivered an earnings surprise of 23.24% in the last reported quarter. It carries a Zacks Rank #2.

 


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