Insurance brokerage firm Brown & Brown, Inc. (BRO) reported better-than-expected third-quarter results driven by favorable premium rates and higher customer acquisition. Following the news, shares jumped 2.5% in the extended trading session on October 25.
The company reported adjusted earnings of $0.58 per share, up 11.5% compared to the prior-year quarter, and beat analyst estimates of $0.53 per share.
Moreover, revenue grew 14.3% year-over-year to $770.3 million and also surpassed Street estimates of $761.47 million. The insurer’s biggest revenue component, commission and fee income, climbed 14.6% compared to the prior year’s quarter. (See Insiders’ Hot Stocks on TipRanks)
Commenting on the results, J. Powell Brown, President, and CEO of BRO, said, “We are very pleased with our growth and profitability in the third quarter. Our dedicated teammates continue to deliver for our existing and prospective customers.”
In response to BRO’s quarterly performance, Wells Fargo analyst Elyse Greenspan maintained a Hold rating on the stock with a price target of $57, implying 14.2% downside potential to current levels.
Greenspan said, “BRO’s margins have been impacted by a combination of internal investments and recent acquisitions that are running at weaker margins than its core business. For its multiple to continue to expand, we believe there would need to be both: (1) steady organic growth that consistently beats its peers, and (2) core margin improvement for the company.”
The analyst noted that BRO’s improved results were driven by increasing premium rates and an overall economic rebound. The company also pointed to supply chain and labor problems as challenges to their performance. Having said that, the analyst noted that BRO’s shares would see upside based on both its results as well as its conference call outlook.
Overall, the stock has a Moderate Buy consensus rating based on 2 Buys and 4 Holds. The average Brown & Brown price target of $61.33 implies 7.7% downside potential to current levels. Shares have gained 42.6% over the past year.
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