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Brown & Brown (BRO) Down 14.8% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Brown & Brown (BRO). Shares have lost about 14.8% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Brown & Brown due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Brown & Brown's Q1 Earnings Beat Estimates, Rise Y/Y

Brown & Brown's first-quarter 2022 adjusted earnings of 78 cents per share beat the Zacks Consensus Estimate by 4%. The bottom line improved 11.4% year over year.

The results reflect improved organic growth and higher commissions and fees, partly offset by higher expenses.

Q1 in Details

Total revenues of $904.7 million outpaced the Zacks Consensus Estimate by 1.3%. The top line improved 11% year over year. The upside can primarily be attributed to increased commission and fees.

Commissions and fees grew 11.1% year over year to $904.3 million. Organic revenues improved 7.8% to $846.4 million in the quarter under review.

Investment income decreased 33.3% year over year to $0.2 million.

EBITDAC was $319.1 million, up 9.4% year over year. EBITDAC margin contracted 50 basis points year over year to 35.3%.

Total expenses increased 11% to $639.7 million, courtesy of a rise in employee compensation and benefits, other operating expenses, amortization, depreciation and interest expenses.

Financial Update

Brown & Brown exited first-quarter 2022 with cash and cash equivalents of $1.7 billion, up more than two-fold from the 2021-end level.

Long-term debt of $3.5 billion as of Mar 31, 2022 was up 76.6% from 2021 end.

Net cash provided by operating activities in the first quarter was $103.6 million, down 24.9% year over year.

Dividend Update

Concurrent with the earnings release, Brown & Brown declared a cash dividend of 10.25 cents per share for the first quarter. The dividend will be paid out on May 18, 2022 to shareholders of record as of May 9.

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How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

The consensus estimate has shifted -7.6% due to these changes.

VGM Scores

At this time, Brown & Brown has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Brown & Brown has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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