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Will Higher Expenses Limit Brown & Brown's (BRO) Growth?
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On Aug 24, 2016, we issued an updated research report on Brown & Brown Inc. (BRO - Free Report) .
Brown & Brown has been witnessing impressive growth, driven by both organic and inorganic means, across all its segments. This, in turn, has been fueling commission and fees that has grown at a five-year CAGR of 11.4%.
The company’s inorganic portfolio has seen substantial improvement. In over a span of a little more than two decades, the company has acquired 460 insurance intermediary operations. A sustained solid operational performance has been suppoting its sturdy capital position. This, is turn, has been aiding the company to engage in shareholder friendly moves that make it an attractive pick for yield seeking investors. The insurance broker not only repurchased shares but also increased its payout each year. In fact, the company's dividend has increased at a five-year growth rate of 7.6%.
With respect to quarterly performance, the company’s bottom line in the second quarter surpassed the Zacks Consensus Estimate by 11.4%. This marks the third straight quarter of positive surprises delivered by the insurance broker, with an average of 10%. The Zacks Consensus Estimate has also been revised upward over the last 60 days.
However, Brown & Brown has been experiencing a rise in expenses, which has been weighing on margin expansion. Also, the company intends to introduce a new long-term stock incentive program in 2016. This action will lead to non-cash stock-based compensation between $23 million and $26 million in 2016.
Additionally, Brown & Brown depends on a limited number of insurance companies to generate a major portion of its commission revenues. This is a cause for concern, as failure to retain any these comapnies will weigh on the top line.
Nonetheless, Brown & Brown’s solid operational performance is expected to enhance shareholder value and drive long-term growth. The expected long-term earnings growth for the company is pegged at 9%.
Zacks Rank and Stocks to Consider
Presently, Brown & Brown carries a Zacks Rank #3 (Hold). Some better-ranked stocks in insurance industry are Allied World Assurance Company Holdings, AG (AWH - Free Report) , Argo Group International Holdings, Ltd. and Erie Indemnity Company (ERIE - Free Report) . While both Allied World Assurance and Argo Group International sport a Zacks Rank #1 (Strong Buy), Erie Indemnity holds a Zacks Rank #2 (Buy).
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Will Higher Expenses Limit Brown & Brown's (BRO) Growth?
On Aug 24, 2016, we issued an updated research report on Brown & Brown Inc. (BRO - Free Report) .
Brown & Brown has been witnessing impressive growth, driven by both organic and inorganic means, across all its segments. This, in turn, has been fueling commission and fees that has grown at a five-year CAGR of 11.4%.
The company’s inorganic portfolio has seen substantial improvement. In over a span of a little more than two decades, the company has acquired 460 insurance intermediary operations. A sustained solid operational performance has been suppoting its sturdy capital position. This, is turn, has been aiding the company to engage in shareholder friendly moves that make it an attractive pick for yield seeking investors. The insurance broker not only repurchased shares but also increased its payout each year. In fact, the company's dividend has increased at a five-year growth rate of 7.6%.
With respect to quarterly performance, the company’s bottom line in the second quarter surpassed the Zacks Consensus Estimate by 11.4%. This marks the third straight quarter of positive surprises delivered by the insurance broker, with an average of 10%. The Zacks Consensus Estimate has also been revised upward over the last 60 days.
However, Brown & Brown has been experiencing a rise in expenses, which has been weighing on margin expansion. Also, the company intends to introduce a new long-term stock incentive program in 2016. This action will lead to non-cash stock-based compensation between $23 million and $26 million in 2016.
Additionally, Brown & Brown depends on a limited number of insurance companies to generate a major portion of its commission revenues. This is a cause for concern, as failure to retain any these comapnies will weigh on the top line.
Nonetheless, Brown & Brown’s solid operational performance is expected to enhance shareholder value and drive long-term growth. The expected long-term earnings growth for the company is pegged at 9%.
Zacks Rank and Stocks to Consider
Presently, Brown & Brown carries a Zacks Rank #3 (Hold). Some better-ranked stocks in insurance industry are Allied World Assurance Company Holdings, AG (AWH - Free Report) , Argo Group International Holdings, Ltd. and Erie Indemnity Company (ERIE - Free Report) . While both Allied World Assurance and Argo Group International sport a Zacks Rank #1 (Strong Buy), Erie Indemnity holds a Zacks Rank #2 (Buy).
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 >>