A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have added about 5.1% in that time frame, outperforming 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 catalysts.
Brown & Brown Q3 Earnings Miss, Revenues Rise Y/Y
Brown & Brown third-quarter 2022 adjusted earnings of 50 cents per share missed the Zacks Consensus Estimate by 16.7%. The bottom line decreased 13.8% year over year.
The quarterly results benefited from improved organic growth and higher net investment income, partly offset by higher expenses.
Q3 in Details
Total revenues of $927.6 million missed the Zacks Consensus Estimate by 1.9%. The top line however improved 20.4% year over year. The upside can primarily be attributed to increased commission and fees, which grew 20.2% year over year to $925.2 million.
Organic revenues improved 6.7% to $799.1 million in the quarter under review.
Investment income increased two-fold year over year to $1.2 million.
Adjusted EBITDAC was $289.8 million, up 5.8% year over year. EBITDAC margin contracted 440 basis points year over year to 31.2%.
Total expenses increased 23.7% to $709.6 million due to a rise in employee compensation and benefits, other operating expenses, amortization, depreciation and interest expenses.
Brown & Brown exited third-quarter 2022 with cash and cash equivalents of $579.5 million, down 16.4% from the 2021-end level.
Long-term debt of $4 billion as of Sep 30, 2022 more than doubled from 2021 end.
Net cash provided by operating activities in the first nine months of 2022 was $599.8 million, down 4.5% year over year.
How Have Estimates Been Moving Since Then?
Since the earnings release, investors have witnessed an upward trend in fresh estimates.
The consensus estimate has shifted 7.87% due to these changes.
At this time, Brown & Brown has a poor Growth Score of F, a grade with the same score on the momentum front. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Brown & Brown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Performance of an Industry Player
Brown & Brown belongs to the Zacks Insurance - Brokerage industry. Another stock from the same industry, Marsh & McLennan (MMC), has gained 11.6% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.
Marsh & McLennan reported revenues of $4.77 billion in the last reported quarter, representing a year-over-year change of +4.1%. EPS of $1.18 for the same period compares with $1.08 a year ago.
Marsh & McLennan is expected to post earnings of $1.39 per share for the current quarter, representing a year-over-year change of +2.2%. Over the last 30 days, the Zacks Consensus Estimate has changed -1.1%.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #3 (Hold) for Marsh & McLennan. Also, the stock has a VGM Score of D.
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