Technology

Brown & Brown (BRO) Up 3.4% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have added about 3.4% 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 its most recent earnings report in order to get a better handle on the important drivers.

Brown & Brown Q2 Earnings Beat, Revenues Improve Y/Y

Brown & Brown, Inc.  second-quarter 2020 adjusted earnings of 34 cents per share beat the Zacks Consensus Estimate by 17.2%. The bottom line also improved 6.3% year over year.

Higher commissions and fees have driven the company’s results, partly offset by increased expenses.

Q2 in Details

Total revenues of $599 million outpaced both the Zacks Consensus Estimate as well as year-ago figure by 4.2%. The upside can primarily be attributed to improved commission and fees, and high organic growth.

Commissions and fees grew 4.4% year over year to $598.2 million. Organic revenues inched up 0.5% to $547.8 million in the quarter under review.

Investment income plunged 80% year over year to $3 million.

EBITDAC was $176.7 million, up 4.8% year over year. EBITDAC margin expanded 20 basis points (bps) year over year to 29.5%.

Total expenses increased 3.9% to $469.4 million courtesy of a rise in employee compensation and benefits, amortization and depreciation.

Financial Update

Brown & Brown exited second-quarter 2020 with cash and cash equivalents of $623.2 million, up 14.9% from 2019-end level.

Long-term debt of $1.6 billion as of Jun 30, 2020 was up 4.4% from 2019 end.

Net cash provided by operating activities in the first half of 2020 was $416.7 million, up 36.3% year over year.

Dividend Update

On Jul 22, Brown & Brown declared cash dividend of 8.5 cents per share. The dividend will be paid on Aug 12, 2020 to shareholders of record as of Aug 5.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended upward during the past month. The consensus estimate has shifted 6.74% due to these changes.

VGM Scores

At this time, Brown & Brown has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Brown & Brown has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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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.

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