On Tuesday, CFRA maintained a "Hold" rating on Brown & Brown, Inc. (NYSE:BRO) but increased the 12-month price target from $90.00 to $106.00.
The adjustment follows the company's second-quarter earnings per share (EPS) of $0.93, which surpassed both the analyst's forecast of $0.86 and the consensus estimate of $0.88.
This performance was driven by a 12.5% revenue increase, of which 10% was organic, and a pretax margin of 29.4%, up from 24.3%.
The firm's new price target is based on a multiple of 24.9 times the projected 2026 operating EPS of $4.25 and 26.8 times the 2025 EPS estimate of $3.95, which was raised by $0.20 today.
These multiples compare to Brown & Brown's one-year average forward multiple of 24.4x and the 21.1x average of its peers.
Additionally, the analyst raised the 2024 EPS estimate to $3.70, an increase of $0.18, reflecting the robust second-quarter results.
Revenue forecasts for Brown & Brown have been slightly adjusted, with the 2024 projection now set for a 10%-15% increase, a slight decrease from the previously expected 12%-16% range.
However, the company is expected to maintain this growth rate into 2025 and 2026, positioning it at the higher end of peer averages.
This anticipated performance is attributed to the firm's capability to capitalize on a strong insurance pricing and demand environment, as well as its active and ongoing acquisition strategy.
The analyst views the current share price levels as fairly valued when compared to peer and historical averages.
In other recent news, Brown & Brown, a leading insurance brokerage firm, reported a robust second-quarter profit, with a 35% increase, primarily due to increased commissions, fees, and stronger investment returns.
The company's total revenue surged 12.5% to $1.18 billion, and net income rose to $257 million, or 90 cents per share.
In addition, the firm recently issued $600 million in senior notes, providing financial flexibility for its operations.
Truist Securities has raised its price target for Brown & Brown to $104, reiterating a Buy rating, reflecting positive expectations for the company's growth.
This move was based on recent market dynamics and the company's strong financial performance.
Brown & Brown also recently expanded its portfolio by acquiring the assets of McNamara Company, which is expected to enhance its service capabilities within its Phoenix operations.
InvestingPro Insights
Following the positive earnings report and CFRA's updated outlook on Brown & Brown, Inc., a deeper dive into the company's financials using InvestingPro offers additional insights. Brown & Brown's market capitalization stands at a solid $27.31 billion, and the company is trading at a P/E ratio of 26.82, reflecting a premium valuation relative to near-term earnings growth. Notably, the firm has demonstrated a commitment to shareholder returns, having raised its dividend for an impressive 31 consecutive years and maintaining dividend payments for 39 years.
InvestingPro data shows a healthy revenue growth of 14.96% over the last twelve months as of Q1 2024, indicating the firm's ability to expand effectively. The company's operating income margin for the same period was 28.61%, which aligns with the pretax margin highlighted in CFRA's analysis. Additionally, Brown & Brown's price is nearing its 52-week high, currently at 98.81% of this peak, signaling strong market confidence.
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