A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have added about 8% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
Brown & Brown Q3 Earnings Top Estimates on Higher Revenues
Brown & Brown, Inc.’s third-quarter 2024 adjusted earnings of 91 cents per share beat the Zacks Consensus Estimate by 4.6%. The bottom line increased 28.2% year over year. The quarterly results reflected improved organic revenues, driven by higher commission and fees and investment income, expanded EBITDAC margin and increased net investment income, offset by higher expenses.
BRO’s Q3 Details
Total revenues of $1.2 billion beat the Zacks Consensus Estimate by 2.2%. The top line improved 11% year over year. The upside can be primarily attributed to commission and fees, which grew 10.4% year over year to $1.1 billion. Our estimate for commission and fees growth was 6.8%. The Zacks Consensus Estimate is pegged at $1.1 billion. Organic revenues improved 9.5% to $1.1 billion in the quarter under review.
Investment income increased 82.3% year over year to $31 million. The Zacks Consensus Estimate for the metric was pegged at $20.6 million and our estimate was $26.8 million. Adjusted EBITDAC was $414 million, up 11.9% year over year. EBITDAC margin expanded 30 basis points (bps) year over year to 34.9%. Our estimate for adjusted EBITDAC was $406.8 million.
Total expenses increased 0.8% to $869 million due to a rise in employee compensation and benefits, other operating expenses, amortization, depreciation and interest. Our estimate was $825.3 million.
Financial Update of BRO
Brown & Brown exited the third quarter with cash and cash equivalents of $2.7 billion, which increased 17.3% from the 2023-end level. Long-term debt was $3.4 billion as of Sept. 30, 2024, up 4.3% from the 2023-end level. Net cash provided by operating activities in the first nine months of 2024 was $813 million, up 15.4% year over year.
Dividend Update
The board of directors paid a regular cash dividend of $111 million in the reported quarter.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month.
VGM Scores
Currently, Brown & Brown has a subpar Growth Score of D, though it is lagging a bit on the Momentum Score front with an F. Charting a somewhat similar path, 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 F. 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 has been net zero. Notably, Brown & Brown has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Performance of an Industry Player
Brown & Brown is part of the Zacks Insurance - Brokerage industry. Over the past month, Arthur J. Gallagher (AJG), a stock from the same industry, has gained 9.8%. The company reported its results for the quarter ended September 2024 more than a month ago.
Arthur J. Gallagher reported revenues of $2.74 billion in the last reported quarter, representing a year-over-year change of +11.8%. EPS of $2.26 for the same period compares with $2 a year ago.
For the current quarter, Arthur J. Gallagher is expected to post earnings of $2.12 per share, indicating a change of +14.6% from the year-ago quarter. The Zacks Consensus Estimate has changed -0.5% over the last 30 days.
Arthur J. Gallagher has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of D.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
