It has been about a month since the last earnings report for Brown & Brown, Inc. (NYSE:BRO) . Shares have added about 1.1% in that time frame, outperforming the market.
Will the recent positive trend continue leading up to its next earnings release, or is BRO 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 Q4 Earnings & Revenues Top, Increase Y/Y
Brown & Brown, Inc. reported fourth-quarter 2017 earnings of 47 cents per share, outpacing the Zacks Consensus Estimate by 11.9%. Also, the bottom line improved 11.9% year over year.
The quarter witnessed noticeable organic revenue growth across all divisions, partially offset by a rise in expenses. Nonetheless, the company saw an increase in Commissions and fees segment in the reported quarter.
2017 Highlights
Adjusted earnings per share of $1.92 beat the Zacks Consensus Estimate by 2.1%.
Revenues came in at $1.9 billion, up 6.5% year over year.
Behind the Headlines
Total revenues amounted to $474.3 million, edging past the Zacks Consensus Estimate of $447 million by approximately 6.1%. Also, the top line improved 9.4% year over year riding on higher Commissions and fees plus net investment income. Organic revenue growth was 9.3% in the reported quarter.
Commissions and fees rose 9.3% year over year to $473.4 million.
Investment income soared 66.7% year over year to $0.5 million.
Total expenses increased nearly 8.7% to $368.0 million, driven by a rise in employee compensation and benefits, other operating expenses as well as depreciation.
Net income before interest, income taxes, depreciation, amortization and change in estimated acquisition earn-out payables (EBITDAC) margin contracted 70 basis points to 30.2%.
Financial Update
Brown & Brown exited the fourth quarter with cash and cash equivalents of $573.4 million, up nearly 11.2% from the 2016-end level.
Long-term debt of $856.1 million as of Dec 31, 2017 was down 15.9% from $1.0184 billion at the end of 2016.
Dividend Update
In the fourth quarter, the company’s board of directors announced a quarterly dividend of 15 cents per share.
On Jan 19, 2018, the company’s board approved a quarterly cash dividend of 15 cents per share, reflecting an 11.1% hike from the earlier payout of 13.5 cents. Notably, this dividend raise marks the 25th consecutive year of the same and will be rewarded to the shareholders of record as of Feb 2, 2018 on Feb 14.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates. There have been five revisions higher for the current quarter compared to one lower. In the past month, the consensus estimate has shifted by 19% due to these changes.
Brown & Brown, Inc. Price and Consensus
Brown & Brown, Inc. Price and Consensus | Brown & Brown, Inc. Quote
VGM Scores
At this time, BRO has a poor Growth Score of F, however its Momentum is doing a bit better with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the bottom 20% quintile 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.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise BRO has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
Brown & Brown, Inc. (BRO): Free Stock Analysis Report
Original post
Zacks Investment Research