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Brown & Brown (BRO) Gains 12% in a Year: More Upside Left?

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Shares of Brown & Brown, Inc. (BRO - Free Report) have rallied 12.1% in a year compared with the industry’s increase of 5.9%. The Finance sector and the Zacks S&P 500 composite declined 11.4% and 11.7%, respectively in the same time frame. With a market capitalization of $18.4 billion, the average volume of shares traded in the last three months was about 1.3 million.
 

Zacks Investment Research
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Strong performing segments, strategic buyouts to capitalize on growing markets opportunities, sturdy financial standing and effective capital deployment continue to drive this Zacks Rank #3 (Hold) insurance broker. The Zacks Consensus Estimate for 2022 has moved 1.3% north in the past 30 days, reflecting analysts’ optimism.

BRO is one of the largest insurance brokers whose total shareholder return has outperformed both its peer group and the S&P 500 in the last five years. It has a solid track record of beating earnings estimates in the last 11 quarters.

Can BRO Retain the Momentum?

The Zacks Consensus Estimate for BRO’s 2022 earnings is pegged at $2.31, indicating a 5.5% increase from the year-ago reported figure on 17.7% higher revenues of $3.6 billion. The consensus estimate for 2023 earnings is pegged at $2.56, indicating a 10.7% increase from the year-ago reported figure on 12.5% higher revenues of $4 billion.

Brown and Brown’s top line, which witnessed a five-year annual growth rate of 11.6%, should continue to benefit from increasing commissions and fees across its segments. Improving new business, solid retention and continued rate increases for most lines of coverage should drive increasing commissions and fees.

Brown & Brown has an impressive inorganic story that helps strengthen its compelling products and service portfolio as well as expand its global reach.

A solid capital position by virtue of sustained strong operational performance continues to aid BRO in making consistent investments in boosting organic growth and margin expansion.

Banking on strong capital and liquidity position, BRO increased dividends over the last 28 years, making it an attractive pick for yield-seeking investors.

Attractive Valuation

BRO stocks are trading at a discount to the industry average. Its price-to-book multiple of 4.29 is much lower than the industry average of 6.66. Before value expands, it is wise to take a position in the stock.

Stocks to Consider

Some better-ranked stocks from the insurance industry are Arch Capital Group Ltd. (ACGL - Free Report) , American Financial Group, Inc. (AFG - Free Report) and ProAssurance Corporation (PRA - Free Report) , each sporting a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

The bottom line of Arch Capital surpassed earnings estimates in three of the last four quarters and missed in one, the average being 33.64%. Year to date, the insurer has rallied 4.6%.

The Zacks Consensus Estimate for Arch Capital’s 2022 and 2023 earnings has moved 5.7% and 4.9% north, respectively, in the past 30 days.

American Financial’s earnings surpassed estimates in each of the last four quarters, the average beat being 37.09%. Year to date, American Financial has lost 4.1%.

The Zacks Consensus Estimate for AFG’s 2022 and 2023 earnings has moved 3.1% and 3.3% north, respectively, in the past 30 days.

The bottom line of ProAssurance surpassed earnings estimates in three of the last four quarters and missed in one, the average being 150.9%. Year to date, the insurer has lost 12.7%.

The Zacks Consensus Estimate for ProAssurance’s 2022 and 2023 earnings has moved 25.9% and 13.9% north, respectively, in the past 30 days.

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