Results: Brown & Brown, Inc. Beat Earnings Expectations And Analysts Now Have New Forecasts

Brown & Brown, Inc. (NYSE:BRO) just released its second-quarter report and things are looking bullish. It was overall a positive result, with revenues beating expectations by 3.3% to hit US$1.2b. Brown & Brown reported statutory earnings per share (EPS) US$0.90, which was a notable 18% above what the analysts had forecast. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there's been a strong change in the company's prospects, or if it's business as usual. We thought readers would find it interesting to see the analysts latest (statutory) post-earnings forecasts for next year.

Check out our latest analysis for Brown & Brown

Following the latest results, Brown & Brown's nine analysts are now forecasting revenues of US$4.69b in 2024. This would be a modest 4.3% improvement in revenue compared to the last 12 months. Statutory earnings per share are forecast to decrease 5.6% to US$3.27 in the same period. In the lead-up to this report, the analysts had been modelling revenues of US$4.65b and earnings per share (EPS) of US$3.15 in 2024. So the consensus seems to have become somewhat more optimistic on Brown & Brown's earnings potential following these results.

There's been no major changes to the consensus price target of US$97.68, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. That's not the only conclusion we can draw from this data however, as some investors also like to consider the spread in estimates when evaluating analyst price targets. There are some variant perceptions on Brown & Brown, with the most bullish analyst valuing it at US$112 and the most bearish at US$81.14 per share. Analysts definitely have varying views on the business, but the spread of estimates is not wide enough in our view to suggest that extreme outcomes could await Brown & Brown shareholders.

Another way we can view these estimates is in the context of the bigger picture, such as how the forecasts stack up against past performance, and whether forecasts are more or less bullish relative to other companies in the industry. It's pretty clear that there is an expectation that Brown & Brown's revenue growth will slow down substantially, with revenues to the end of 2024 expected to display 8.8% growth on an annualised basis. This is compared to a historical growth rate of 14% over the past five years. By way of comparison, the other companies in this industry with analyst coverage are forecast to grow their revenue at 4.8% annually. Even after the forecast slowdown in growth, it seems obvious that Brown & Brown is also expected to grow faster than the wider 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. Happily, there were no major changes to revenue forecasts, with the business still 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.

With that in mind, we wouldn't be too quick to come to a conclusion on Brown & Brown. Long-term earnings power is much more important than next year's profits. We have forecasts for Brown & Brown going out to 2026, and you can see them free on our platform here.

And what about risks? Every company has them, and we've spotted 1 warning sign for Brown & Brown you should know about.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com