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Brown and Brown (BRO) Q2 Earnings Beat: Will Stock Gain?

Brown & Brown Inc.BRO reported second-quarter 2016 earnings of 49 cents that beat the Zacks Consensus Estimate by 11.3% and increased 14% year over year on higher revenues.

Shares gained about 1.84% in the after-market trading session. We expect the stock to trend higher given the outperformance.

BROWN & BROWN Price, Consensus and EPS Surprise

BROWN & BROWN Price, Consensus and EPS Surprise | BROWN & BROWN Quote

Behind the Headlines

Total revenue for the quarter amounted to $446.5 million, which surpassed the Zacks Consensus Estimate by 1.8%. Also, the top line grew 6.5% year over year on higher commissions and fees. Organic revenues increased 2.6%.

Total core commissions and fees increased nearly 6.5% year over year to $435.5 million due to higher commissions from the four divisions - National Program, Services, Wholesale Brokerage and Retail.

Services commission improved 13.6% year over year followed by a 9.6% increase in Wholesale Brokerage. While Retail commission improved 6.3%, National Program commission grew 2.7%.

Investment income increased nearly 67% year over year to $0.5 million in the quarter.

Total expense increased 6% year over year to $337.5 million due to higher employee compensation and benefits and other operating expenses.

Income before interest, income taxes, depreciation, amortization and the change in estimated acquisition earn-out payables (EBITDAC) increased 8.7% to $149.8 million. EBITDAC margin expanded 60 basis points to 33.5%.

Financial Update

Brown & Brown exited the second quarter with cash and cash equivalents worth $731.6 million, up about 8.7% from the 2015-end level.

Long-term debt was $1.045 billion as of Jun 30, down 2.4% from the 2015-end level.

Dividend Update

On Jul 14, the company's board of directors declared a regular cash dividend of 12.25 cents per share. The dividend will be paid on Aug 17 to shareholders on record as of Aug 9.

Zacks Rank and Stocks to Consider

Brown & Brown presently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the insurance industry are eHealth, Inc. EHTH , First American Financial Corporation FAF and NMI Holdings, Inc. NMIH . Each of these stocks holds a Zacks Rank #2 (Buy).

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EHEALTH INC (EHTH): Free Stock Analysis Report

BROWN & BROWN (BRO): Free Stock Analysis Report

FIRST AMER FINL (FAF): Free Stock Analysis Report

NMI HOLDINGS-A (NMIH): Free Stock Analysis Report

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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.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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