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Brown & Brown Up 44% in a Year: Will the Rally Continue?
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Brown & Brown, Inc. (BRO - Free Report) has been gaining momentum on the back of its impressive top-line performance, new business growth, acquisitions and solid capital position.
In the past year, shares of this Zacks Rank #2 (Buy) company have surged 44% compared with its industry's 15.3% rally. The company’s efforts to ramp up growth and its solid capital position should continue to drive shares higher.
What’s Driving the Stock?
Brown and Brown’s revenue growth has been impressive over the years. In 2019, revenues increased 13.7%.
Higher commissions and fees, increased investment income and recent acquisitions have aided the company’s top-line growth.
In 2019, commission and fees increased 18.6% year over year. Profit-sharing contingent commissions and Guaranteed Supplemental Commissions (GSCs) for 2019 increased 24.9% from the year-ago period. Over the last three years, profit-sharing contingent commissions have been in the range of 3% to 3.5% of the company’s total core commissions and fees. The trend is expected to continue through 2020 and lead to encouraging organic revenue growth rate.
Brown & Brown boasts impressive organic and inorganic growth. Revenues grew as a result of its focus on net new business growth and acquisitions. In 2019, the company closed 23 transactions with annualized revenues of $105 million. In the ongoing quarter, it has already closed two acquisitions.
In 2019, investment income increased 110.5%. The increase was due to additional interest income driven by higher interest rates and cash management activities to earn a higher yield on excess cash balances.
Brown & Brown’s capital position is also commendable. It maintains a sturdy capital and liquidity position, which enables the company to enhance shareholder value via dividend increases and share buybacks. In 2019, the company raised dividend by 6.25%, marking the 26th yearly dividend hike. Dividend increased at a five-year CAGR of 10.8% and currently yields 0.8% to the company. Disciplined capital deployment instills investors’ confidence in the stock.
Other Noteworthy Factors
Estimates for Brown & Brown have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2020 and 2021 earnings has moved north by 2% and 2.4%, respectively.
This insurance broker has a decent record of delivering positive earnings surprises in each of the last four quarters, the average beat being 7.97%.
The Zacks Consensus Estimate for the company’s 2020 and 2021 earnings indicates an improvement of 10% and 8.8%, respectively, from the year-ago reported figures.
eHealth surpassed estimates in each of the last four quarters, with the average positive surprise being 182.77%.
Brighthouse Financial and Aon surpassed estimates in three of the last four quarters, with the average positive surprise being 4.57% and 0.62% respectively.
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Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
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Brown & Brown Up 44% in a Year: Will the Rally Continue?
Brown & Brown, Inc. (BRO - Free Report) has been gaining momentum on the back of its impressive top-line performance, new business growth, acquisitions and solid capital position.
In the past year, shares of this Zacks Rank #2 (Buy) company have surged 44% compared with its industry's 15.3% rally. The company’s efforts to ramp up growth and its solid capital position should continue to drive shares higher.
What’s Driving the Stock?
Brown and Brown’s revenue growth has been impressive over the years. In 2019, revenues increased 13.7%.
Higher commissions and fees, increased investment income and recent acquisitions have aided the company’s top-line growth.
In 2019, commission and fees increased 18.6% year over year. Profit-sharing contingent commissions and Guaranteed Supplemental Commissions (GSCs) for 2019 increased 24.9% from the year-ago period. Over the last three years, profit-sharing contingent commissions have been in the range of 3% to 3.5% of the company’s total core commissions and fees. The trend is expected to continue through 2020 and lead to encouraging organic revenue growth rate.
Brown & Brown boasts impressive organic and inorganic growth. Revenues grew as a result of its focus on net new business growth and acquisitions. In 2019, the company closed 23 transactions with annualized revenues of $105 million. In the ongoing quarter, it has already closed two acquisitions.
In 2019, investment income increased 110.5%. The increase was due to additional interest income driven by higher interest rates and cash management activities to earn a higher yield on excess cash balances.
Brown & Brown’s capital position is also commendable. It maintains a sturdy capital and liquidity position, which enables the company to enhance shareholder value via dividend increases and share buybacks. In 2019, the company raised dividend by 6.25%, marking the 26th yearly dividend hike. Dividend increased at a five-year CAGR of 10.8% and currently yields 0.8% to the company. Disciplined capital deployment instills investors’ confidence in the stock.
Other Noteworthy Factors
Estimates for Brown & Brown have been revised upward over the past 60 days, reflecting analysts’ confidence in the stock. The Zacks Consensus Estimate for 2020 and 2021 earnings has moved north by 2% and 2.4%, respectively.
This insurance broker has a decent record of delivering positive earnings surprises in each of the last four quarters, the average beat being 7.97%.
The Zacks Consensus Estimate for the company’s 2020 and 2021 earnings indicates an improvement of 10% and 8.8%, respectively, from the year-ago reported figures.
Other Stocks to Consider
Investors interested in the insurance sector might consider some other top-ranked stocks like eHealth, Inc. (EHTH - Free Report) , Brighthouse Financial, Inc. (BHF - Free Report) and Aon plc (AON - Free Report) . While eHealth sports a Zacks Rank #1 (Strong Buy), Brighthouse Financial and Aon plc carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
eHealth surpassed estimates in each of the last four quarters, with the average positive surprise being 182.77%.
Brighthouse Financial and Aon surpassed estimates in three of the last four quarters, with the average positive surprise being 4.57% and 0.62% respectively.
Looking for Stocks with Skyrocketing Upside?
Zacks has just released a Special Report on the booming investment opportunities of legal marijuana.
Ignited by new referendums and legislation, this industry is expected to blast from an already robust $6.7 billion to $20.2 billion in 2021. Early investors stand to make a killing, but you have to be ready to act and know just where to look.
See the pot trades we're targeting>>