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BRO Lags Industry, Trades at Premium: What Should Investors Do Now?
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Key Takeaways
BRO leverages strategic acquisitions to capture market opportunities, completing 687 acquisitions since 1993.
BRO's diverse business model and operational expertise support robust liquidity position.
BRO has raised dividends for 30 consecutive years, with a 5-year CAGR of 8.7%.
Shares of Brown & Brown, Inc. (BRO - Free Report) have gained 20.4% in the past year, underperforming its industry and the Finance sector’s growth of 23.4% and 20.7%, respectively. It however, outperformed the Zacks S&P 500 composite’s return of 11.6%.
The insurer has a market capitalization of $30.91 billion. The average volume of shares traded in the last three months was 1.8 million.
BRO vs Industry, Sector & S&P 500 in 1 Year
Image Source: Zacks Investment Research
BRO Shares are Expensive
BRO shares are trading at a premium to the industry. Its price-to-forward 12-months earnings of 24.9X is higher than the industry average of 22.71X. Shares of other insurers like Arthur J. Gallagher & Co. (AJG - Free Report) and Erie Indemnity Company (ERIE - Free Report) are also trading at a multiple higher than the industry average, while Marsh & McLennan Companies, Inc. (MMC - Free Report) is trading at a discount.
Image Source: Zacks Investment Research
BRO’s Encouraging Growth Projection
The Zacks Consensus Estimate for Brown & Brown’s 2025 earnings per share indicates a year-over-year increase of 8.5%. The consensus estimate for revenues is pegged at $5.20 billion, implying a year-over-year improvement of 8.2%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.8% and 8.1%, respectively, from the corresponding 2025 estimates.
Earnings have grown 21.5% in the past five years, better than the industry average of 15.2%. Brown & Brown's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 6.35%.
Bearish Analyst Sentiment on BRO
Five of the eight analysts covering the stock have lowered estimates for 2025, while four analysts have lowered the same for 2026 over the past 60 days.
The Zacks Consensus Estimate for 2025 earnings has moved down 0.4% in the past 60 days, while the same for 2026 has moved down 1.3% in the same time frame.
Image Source: Zacks Investment Research
Target Price Reflects Potential Upside
Based on short-term price targets offered by 13 analysts, the Zacks average price target is $119.77 per share. The average indicates a potential 8.3% upside from the last closing price.
Image Source: Zacks Investment Research
Factors Impacting BRO
Commissions and fees, the main component of the top line, benefit from increasing new business, strong retention and continued rate increases for most lines of coverage. The company met its intermediate annual revenue goal of $4 billion, doubling in the last five years. The insurance broker continually makes investments in boosting organic growth and margin expansion. It has an industry-leading adjusted EBITDAC margin.
Brown & Brown’s strategic buyouts help it capitalize on growing market opportunities, strengthen its compelling products and service portfolio, expand global reach and accelerate its growth rate. The insurance broker continued to build relationships with many other companies. From 1993 through the first quarter of 2025, Brown & Brown acquired 687 insurance intermediary operations. The Quintes buyout was the largest transaction in 2024.
Banking on operational expertise, BRO boasts a strong liquidity position with an improving leverage ratio. The strength of its operating model and diversity of businesses ensures strong cash conversion. The company effectively deploys cash into acquisitions, capital expenditure and wealth distribution for shareholders via dividend increases.
BRO has an impressive dividend history. The strong capital position enables Brown & Brown to distribute wealth to shareholders via dividend increases. To dividend payments, the company has increased dividends for the last 30 years at a five-year (2019-2024) CAGR of 8.7%.
Conclusion
New business, strong retention, rate increases, strategic buyouts and impressive dividend history poise the company well for growth. Favorable growth estimates and positive analyst sentiment are the other positives. A robust capital position over the years reflects its financial flexibility.
Image: Bigstock
BRO Lags Industry, Trades at Premium: What Should Investors Do Now?
Key Takeaways
Shares of Brown & Brown, Inc. (BRO - Free Report) have gained 20.4% in the past year, underperforming its industry and the Finance sector’s growth of 23.4% and 20.7%, respectively. It however, outperformed the Zacks S&P 500 composite’s return of 11.6%.
The insurer has a market capitalization of $30.91 billion. The average volume of shares traded in the last three months was 1.8 million.
BRO vs Industry, Sector & S&P 500 in 1 Year
Image Source: Zacks Investment Research
BRO Shares are Expensive
BRO shares are trading at a premium to the industry. Its price-to-forward 12-months earnings of 24.9X is higher than the industry average of 22.71X. Shares of other insurers like Arthur J. Gallagher & Co. (AJG - Free Report) and Erie Indemnity Company (ERIE - Free Report) are also trading at a multiple higher than the industry average, while Marsh & McLennan Companies, Inc. (MMC - Free Report) is trading at a discount.
Image Source: Zacks Investment Research
BRO’s Encouraging Growth Projection
The Zacks Consensus Estimate for Brown & Brown’s 2025 earnings per share indicates a year-over-year increase of 8.5%. The consensus estimate for revenues is pegged at $5.20 billion, implying a year-over-year improvement of 8.2%. The consensus estimate for 2026 earnings per share and revenues indicates an increase of 8.8% and 8.1%, respectively, from the corresponding 2025 estimates.
Earnings have grown 21.5% in the past five years, better than the industry average of 15.2%. Brown & Brown's bottom line outpaced estimates in three of the trailing four quarters and missed in one, the average surprise being 6.35%.
Bearish Analyst Sentiment on BRO
Five of the eight analysts covering the stock have lowered estimates for 2025, while four analysts have lowered the same for 2026 over the past 60 days.
The Zacks Consensus Estimate for 2025 earnings has moved down 0.4% in the past 60 days, while the same for 2026 has moved down 1.3% in the same time frame.
Image Source: Zacks Investment Research
Target Price Reflects Potential Upside
Based on short-term price targets offered by 13 analysts, the Zacks average price target is $119.77 per share. The average indicates a potential 8.3% upside from the last closing price.
Image Source: Zacks Investment Research
Factors Impacting BRO
Commissions and fees, the main component of the top line, benefit from increasing new business, strong retention and continued rate increases for most lines of coverage. The company met its intermediate annual revenue goal of $4 billion, doubling in the last five years.
The insurance broker continually makes investments in boosting organic growth and margin expansion. It has an industry-leading adjusted EBITDAC margin.
Brown & Brown’s strategic buyouts help it capitalize on growing market opportunities, strengthen its compelling products and service portfolio, expand global reach and accelerate its growth rate. The insurance broker continued to build relationships with many other companies. From 1993 through the first quarter of 2025, Brown & Brown acquired 687 insurance intermediary operations. The Quintes buyout was the largest transaction in 2024.
Banking on operational expertise, BRO boasts a strong liquidity position with an improving leverage ratio. The strength of its operating model and diversity of businesses ensures strong cash conversion. The company effectively deploys cash into acquisitions, capital expenditure and wealth distribution for shareholders via dividend increases.
BRO has an impressive dividend history. The strong capital position enables Brown & Brown to distribute wealth to shareholders via dividend increases. To dividend payments, the company has increased dividends for the last 30 years at a five-year (2019-2024) CAGR of 8.7%.
Conclusion
New business, strong retention, rate increases, strategic buyouts and impressive dividend history poise the company well for growth. Favorable growth estimates and positive analyst sentiment are the other positives. A robust capital position over the years reflects its financial flexibility.
Given the bearish analysts’ sentiment and premium valuation, it is better to stay cautious about this Zacks Rank #3 (Hold) stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.