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Why Is Brown & Brown (BRO) Up 1.6% Since Last Earnings Report?

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It has been about a month since the last earnings report for Brown & Brown (BRO - Free Report) . Shares have added about 1.6% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Brown & Brown due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Brown & Brown Q3 Earnings In Line, Revenues Up Y/Y

Brown & Brown third-quarter 2019 adjusted earnings of 39 cents per share matched the Zacks Consensus Estimate and grew 2.6% year over year.

The company’s performance was driven by increased investment income, commissions and fees and recent acquisitions.

Behind the Headlines

Total revenues of $619 million beat the Zacks Consensus Estimate by 1.7%. Moreover, the top line rose 16.6% year over year on higher commissions and fees plus net investment income.

Commissions and fees grew 16.5% year over year to $617.4 million.

Investment income surged 112.5% year over year to $1.7 million.

Total expenses increased 20.2% to $466.8 million, driven by a rise in employee compensation and benefits, amortization, depreciation as well as other operating expenses and interest expense.

EBITDAC was $195 million, up 9.5% year over year. EBITDAC margin contracted 200 basis points year over year to 31.5%.

Financial Update

Brown & Brown exited the third quarter of 2019 with cash and cash equivalents of $497.5 million, up 13.3% from 2018-end level.

Long-term debt of $1.5 billion as of Sep 30, 2019 was up 3.8% from 2018 end.

Net cash provided by operating activities in the first nine months of 2019 was $447.1 million, up 25.8% year over year.

Dividend Update

The company paid out cash dividend of 8 cents per share in the third quarter, up 6.7% year over year.

Acquisition Update

Brown & Brown closed five acquisitions in the reported quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates review. The consensus estimate has shifted -8.77% due to these changes.

VGM Scores

At this time, Brown & Brown has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brown & Brown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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