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Why Is Brown & Brown (BRO) Up 2.6% Since the Last Earnings Report?

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It has been about a month since the last earnings report for Brown & Brown, Inc. (BRO - Free Report) . Shares have added about 2.6% in that time frame, outperforming the market.

Will the recent positive trend continue leading up to the stock's next earnings release, or is it due for a pullback? Before we dive into how investors and analysts have reacted 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 Q2 Earnings Beat, Revenues Improve Y/Y

Brown & Brown reported second-quarter 2017 earnings of $0.49 per share that beat the Zacks Consensus Estimate by 4.3%. However, earnings remained flat year over year.

The quarter witnessed improved revenues, partially offset by a rise in expenses. Nonetheless, the company saw an increase in its commissions and fees.

Including change in estimated acquisition earn-out payables of 3 cents per share, net income came in at 46 cents per share, down 2.1% from the year-ago quarter.

Behind the Headlines

Total revenue amounted to $466.3 million, beating the Zacks Consensus Estimate of $465 million by approximately 0.3%. Also, the top line improved 4.4% year over year riding on higher commissions and fees. Organic revenue growth was 1.6% in the reported quarter.

Commissions and fees rose 4.3% year over year to $464.7 million.

Investment income fell 20% year over year to $0.4 million.

Total expenses increased 6.2% to $358.3 million, owing to a rise in employee compensation and benefits, other operating expenses, depreciation, interest as well as change in estimated acquisition earn-out payables.

Net income before interest, income taxes, depreciation, amortization and change in estimated acquisition earn-out payables (EBITDAC) margin decreased 120 basis points to 32.3%.

Financial Update

Brown & Brown exited the second quarter with cash and cash equivalents of $600.3 million, up 16.4% from the 2016-end level.

Long-term debt of $965.4 million as of Jun 30, 2017 was down 5.2% from $1.0184 billion at the end of 2016.

Dividend Update

In the second quarter, the company’s board of directors announced a quarterly dividend of $0.14 per share.

On Jul 13, 2017, the company’s board approved a quarterly cash dividend of $0.135 per share.

How Have Estimates Been Moving Since Then?

Following the release, investors have witnessed a downward trend in fresh estimates. There have been four revisions lower for the current quarter.

Brown & Brown, Inc. Price and Consensus

VGM Scores

At this time, Brown & Brown's stock has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of C on the value side, putting it in the middle 20% 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.

Our style scores indicate that the stock is more suitable for growth investors than value investors.

Outlook

Estimates have been broadly trending downward for the stock. The magnitude of this revision also indicates a downward shift. Notably, the stock has a Zacks Rank #3 (Hold). We expect in-line returns from the stock in the next few months.


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