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Why You Should Add Brown & Brown (BRO) Stock to Your Portfolio

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Brown & Brown’s (BRO - Free Report) new businesses, improved customer retention, premium-rate increases across the majority of business lines, strategic acquisitions and a strong financial position make it worth adding to one’s portfolio.

BRO has a decent history of delivering earnings surprises in the last four reported quarters. Earnings of the insurer increased 16.8% in the last five years, better than the industry average of 12.6%.

Zacks Rank and Price Performance

Brown & Brown presently carries a Zacks Rank #2 (Buy). The company’s shares have gained 29.6% year to date compared with the industry’s growth of 15.8%. The Finance sector has risen 6.7% in the same period and the Zacks S&P 500 composite increased 17%.

Zacks Investment Research
Image Source: Zacks Investment Research

Optimistic Growth Projections

The Zacks Consensus Estimate for 2023 earnings per share (EPS) is pegged at $2.69, suggesting a year-over-year increase of 18% on 17.6% higher revenues of $4.2 billion. The consensus estimate for 2024 EPS is pegged at $2.96, indicating a year-over-year increase of 10% on 7.7% higher revenues of $4.5 billion.

Growth Drivers

Brown and Brown’s commissions and fees should continue to benefit from increasing new business, strong retention and continued rate increases for most lines of coverage. This, in turn, should drive the top line. The top line witnessed a five-year annual growth rate of 14%.

The insurance broker intends to make consistent investments in boosting organic growth and margin expansion. It delivered organic growth of nearly 12% in the first half of 2023. The company expects its diversification and solid underwriting results to help it retain its business and expand its capacity in the future.

Brown & Brown boasts an impressive inorganic story that helps strengthen its compelling products and service portfolio, expands global reach and accelerates growth rate. Strategic buyouts also help BRO to capitalize on growing market opportunities. The company completed six acquisitions, which are expected to generate annual revenues of $24 million. The acquisition of Kentro Capital, announced in May 2023, is expected to close in the fourth quarter of 2023.

Backed by a sustained operational performance, Brown & Brown maintained a strong liquidity position. BRO has strong cash conversion due to the strength of operating model and diversity of businesses. Moreover, the company reduced its outstanding debt in the second quarter by making payments of $130 million.

Impressive Dividend History

A solid capital position supported BRO in increasing dividends over the last 29 years. It increased at a five-year (2019-2023) CAGR of 6.57%, making it an attractive pick for yield-seeking investors.

Other Stocks to Consider

Some other top-ranked players in the broader Finance space include Aegon N.V. (AEG - Free Report) , Trupanion, Inc. (TRUP - Free Report) and Employers Holdings, Inc. (EIG - Free Report) . Each of these companies presently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Aegon’s current-year earnings indicates 42.1% year-over-year growth. In the past 30 days, AEG has witnessed one upward estimate revision against none in the opposite direction.

The Zacks Consensus Estimate for Trupanion’s current-year earnings has improved 3.8% in the past 30 days. It has witnessed one upward estimate revision during this time against no movement in the opposite direction. Also, the consensus mark for TRUP’s revenues in 2023 suggests 19.5% year-over-year growth.

The consensus mark for Employers Holdings’ current-year earnings indicates a 14.3% year-over-year increase. It has witnessed one upward estimate revision in the past 60 days against no downward movement. Furthermore, the consensus estimate for EIG’s revenues in 2023 suggests 20.5% year-over-year growth.

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