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Here's Why You Must Buy Brown & Brown (BRO) Stock Right Now

Brown & Brown’s BRO new businesses, improved customer retention, premium rate increases across the majority of business lines, strategic acquisitions and a strong financial position make it worth adding to one’s portfolio.

BRO has a decent history of delivering earnings surprises in the last four reported quarters. Earnings of the insurer increased 16.8% in the last five years, better than the industry average of 11.4%.

Zacks Rank and Price Performance

Brown & Brown presently carries a Zacks Rank #2 (Buy). The company’s shares have gained 30.8% year to date compared with the industry’s growth of 17.2%. The Finance sector has risen 7.5% in the same period and the Zacks S&P 500 composite has grown 19.7%.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

Rising Estimates

The Zacks Consensus Estimate for 2023 earnings per share (EPS) is pegged at $2.75, suggesting a year-over-year increase of 20.6% on 17.8% higher revenues of $4.2 billion. The consensus estimate for 2024 EPS is pegged at $2.99, indicating a year-over-year increase of 8.9% on 8% higher revenues of $4.6 billion.

Business Tailwinds

Brown and Brown’s commissions and fees should continue to benefit from increasing new businesses, strong retention and continued rate increases for most lines of coverage. This, in turn, should drive the top line. The top line witnessed a five-year annual growth rate of 14%.

The insurance broker intends to make consistent investments in boosting organic growth and margin expansion. It delivered organic growth of nearly 11% in the first nine months of 2023. The company expects its diversification and solid underwriting results to help it retain its business and expand its capacity in the future.

Brown & Brown boasts an impressive inorganic story that helps strengthen its compelling products and service portfolio, expand global reach and accelerate the growth rate. Strategic buyouts also help BRO to capitalize on growing market opportunities. The company completed seven acquisitions, which are expected to generate annual revenues of $14 million. The acquisition of Kentro Capital was completed in October 2023, and is expected to add specialty capabilities and consolidate its presence in London.

Backed by a sustained operational performance, Brown & Brown maintained a strong liquidity position. BRO has a strong cash conversion due to the strength of its operating model and diversity of businesses. Moreover, the company reduced its outstanding debt in the third quarter by making payments of $100 million.

Impressive Dividend History

A solid capital position supported BRO in increasing dividends over the last 29 years. Dividends increased at a five-year (2019-2023) CAGR of 10.2%, making it an attractive pick for yield-seeking investors.

Other Stocks to Consider

Some other top-ranked stocks from the Brokerage Insurance space are Arthur J. Gallagher & Co. AJG, Marsh & McLennan Companies, Inc. MMC and Aon plc AON. These three companies presently carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Arthur J. Gallagher delivered a four-quarter average earnings surprise of 2.2%. AJG has gained 25.9% in a year.

The Zacks Consensus Estimate for AJG’s 2023 and 2024 earnings per share (EPS) is pegged at $8.79 and $10.11, indicating year-over-year increases of 13.6% and 15%, respectively.

Marsh & McLennan delivered a four-quarter average earnings surprise of 6.5%. MMC has gained 16.5% in a year.

The Zacks Consensus Estimate for Marsh & McLennan’s 2023 and 2024 EPS is pegged at $7.93 and $8.67, indicating year-over-year increases of 15.8% and 9.3%, respectively.

Aon delivered a four-quarter average earnings surprise of 1.4%. Shares of AON have gained 7.1% in a year.

The Zacks Consensus Estimate for Aon’s 2023 and 2024 EPS is pegged at $14.36 and $16.27, indicating year-over-year increases of 7.2% and 13.3%, respectively.

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Arthur J. Gallagher & Co. (AJG) : Free Stock Analysis Report

Brown & Brown, Inc. (BRO) : Free Stock Analysis Report

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