Last week, you might have seen that Brown & Brown, Inc. (NYSE:BRO) released its yearly result to the market. The early response was not positive, with shares down 7.4% to US$44.08 in the past week. Brown & Brown reported US$2.6b in revenue, roughly in line with analyst forecasts, although statutory earnings per share (EPS) of US$1.69 beat expectations, being 3.6% higher than what the analysts expected. The analysts typically update their forecasts at each earnings report, and we can judge from their estimates whether their view of the company has changed or if there are any new concerns to be aware of. Readers will be glad to know we've aggregated the latest statutory forecasts to see whether the analysts have changed their mind on Brown & Brown after the latest results.
After the latest results, the ten analysts covering Brown & Brown are now predicting revenues of US$2.86b in 2021. If met, this would reflect a decent 9.8% improvement in sales compared to the last 12 months. Statutory earnings per share are predicted to accumulate 6.5% to US$1.81. Before this earnings report, the analysts had been forecasting revenues of US$2.78b and earnings per share (EPS) of US$1.72 in 2021. So there seems to have been a moderate uplift in sentiment following the latest results, given the upgrades to both revenue and earnings per share forecasts for next year.
Despite these upgrades,the analysts have not made any major changes to their price target of US$51.33, suggesting that the higher estimates are not likely to have a long term impact on what the stock is worth. The consensus price target is just an average of individual analyst targets, so - it could be handy to see how wide the range of underlying estimates is. There are some variant perceptions on Brown & Brown, with the most bullish analyst valuing it at US$55.00 and the most bearish at US$48.00 per share. Still, with such a tight range of estimates, it suggeststhe analysts have a pretty good idea of what they think the company is worth.
One way to get more context on these forecasts is to look at how they compare to both past performance, and how other companies in the same industry are performing. Next year brings more of the same, according to the analysts, with revenue forecast to grow 9.8%, in line with its 9.7% annual growth over the past five years. Compare this with the wider industry, which analyst estimates (in aggregate) suggest will see revenues grow 5.2% next year. So it's pretty clear that Brown & Brown is forecast to grow substantially faster than its industry.
The Bottom Line
The biggest takeaway for us is the consensus earnings per share upgrade, which suggests a clear improvement in sentiment around Brown & Brown's earnings potential next year. Pleasantly, they also upgraded their revenue estimates, and their forecasts suggest the business is expected to grow faster than the wider industry. There was no real change to the consensus price target, suggesting that the intrinsic value of the business has not undergone any major changes with the latest estimates.
Keeping that in mind, we still think that the longer term trajectory of the business is much more important for investors to consider. At Simply Wall St, we have a full range of analyst estimates for Brown & Brown going out to 2023, and you can see them free on our platform here..
You should always think about risks though. Case in point, we've spotted 1 warning sign for Brown & Brown you should be aware of.
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