Brown & Brown, Inc. (NYSE:BRO) reported fourth-quarter 2018 earnings of 26 cents per share, missing the Zacks Consensus Estimate by 3.7%. However, the bottom line improved 8.3% year over year.
Though the quarter witnessed increased commissions and fees plus net investment income, organic revenues declined. As expenses increased, net income before interest, income taxes, depreciation, amortization and a change in estimated acquisition earn-out payables (EBITDAC) declined in the quarter.
Behind the Headlines
Adjusted revenues of $508.7 million beat the Zacks Consensus Estimate by 1.5%. Moreover, the top line rose 7.4% year over year, riding on higher commissions and fees plus net investment income. Organic revenues declined 2.1% in the reported quarter.
Commissions and fees grew 5.6% year over year to $454.2 million.
Investment income increased 20% year over year to $0.6 million.
Total expenses increased 10.9% to $408 million, driven by a rise in employee compensation and benefits as well as other operating expenses and interest expense.
EBITDAC were $143 million, down 0.1% year over year. EBITDAC margin contracted 210 basis points (bps) year over year to 28.1%.
Brown & Brown, Inc. Price, Consensus and EPS Surprise
Full Year Highlights
Brown & Brown delivered earnings of $1.22 in 2018, missing the Zacks Consensus Estimate by a cent.
Revenues of about $2 billion were in line the consensus mark and increased 7.1% from 2017.
EBITDAC increased 1.7% year over year to $615.4 million with EBITDAC margin contracting 160 bps.
Financial Update
Brown & Brown exited 2018 with cash and cash equivalents of $777.6 million, down 5.6% from 2017-end level.
Long-term debt of $1.5 billion as of Dec 31, 2018 was up 70.2% from 2017 end.
Net cash provided by operating activities in 2018 came in at $567.5 million, up 28.4% from 2017.
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 hurt the top line by $6.3 million and the bottom line by 1 cent in the quarter under review.
Zacks Rank
Brown & Brown currently has a Zacks Rank #2 (Buy).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Insurers
Of the insurance industry players that have reported fourth-quarter earnings so far, The Travelers Companies, Inc. (NYSE:TRV) and RLI Corp. (NYSE:RLI) beat the respective Zacks Consensus Estimate for earnings while The Progressive Corporation (NYSE:PGR) missed the same.
Wall Street’s Next Amazon (NASDAQ:AMZN)
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Brown & Brown, Inc. (BRO): Get Free Report
RLI Corp. (RLI): Get Free Report
The Travelers Companies, Inc. (TRV): Free Stock Analysis Report
The Progressive Corporation (PGR): Free Stock Analysis Report
Original post