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Brown & Brown (BRO) Q1 Earnings Top on Revenue Rise, Tax Cut

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Brown & Brown, Inc. (BRO - Free Report) reported first-quarter 2018 earnings of 33 cents per share, outpacing the Zacks Consensus Estimate by 13.79%. Also, the bottom line soared 50% year over year.

Brown & Brown, Inc. Price, Consensus and EPS Surprise

 

The quarter witnessed strong organic revenue growth along with increase in commissions and fees. Though expenses increased, the bottom line benefited from low tax incidence.

Behind the Headlines

Total revenues amounted to $501.5 million, edging past the Zacks Consensus by 1.93%. Moreover, the top line improved about 7.8% year over year, riding on higher Commissions and fees plus net investment income. Organic revenue growth was 5.7% in the reported quarter.

Commissions and fees rose 12.6% year over year to $500.4 million.

Investment income surged 50% year over year to $0.6 million.

Total expenses increased nearly 8.2% to $383.1 million, driven by a rise in employee compensation and benefits as well as other operating expenses.

Net income before interest, income taxes, depreciation, amortization and change in estimated acquisition earn-out payables (EBITDAC) margin contracted 160 basis points to 31.2%.

Financial Update

Brown & Brown exited the first quarter with cash and cash equivalents of $826.4 million, up 0.3% from the 2017-end level.

Long-term debt of $851.5 million as of Mar 31, 2018 was down 0.5% from the level at 2017 end.

Net cash provided by operating activities of $79.5 million was down 11.7% year over year.

Adoption of New Accounting Standard

On Jan 1, 2018, Brown & Brown adopted FASB Accounting Standards Update No. 2014-09, ‘Revenue from Contracts with Customers (Topic 606)’ and Accounting Standards Codification (Topic 340) — Other Assets and Deferred Cost. This drove the top line by $27.4 million and the bottom line by 4 cents.

Dividend Update

The board of directors approved a dividend of 7.50 cents per share, payable May 18, 2018 to shareholders of record on May 9, 2018.

Zacks Rank and Performance of Other Insurers

Brown & Brown carries a Zacks Rank #3 (Hold). You can see  the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The bottom line of Torchmark Corporation , The Progressive Corporation (PGR - Free Report) and RLI Corp. (RLI - Free Report) surpassed the respective Zacks Consensus Estimate in the first quarter of 2018.

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