Brown & Brown Gains 40% YTD: Will the Rally Last?

Brown & Brown, Inc.'s BRO shares have jumped 40% year to date (YTD) compared with the industry's growth of 20.6%. The Finance sector and the Zacks S&P 500 composite have risen 7.7% and 12.3%, respectively, in the same time frame. With a market capitalization of $28.61 billion, the average volume of shares traded in the last three months was 1.17 million.

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The rally was largely driven by higher core commissions and fees, new business, solid retention, rate increases, strategic acquisitions, a strong financial position and effective capital deployment.

This Zacks Rank #2 (Buy) insurance broker surpassed earnings estimates in each of the last four quarters, the average being 9.82%.

The Zacks Consensus Estimate for 2024 and 2025 earnings has moved 1.6% and 1.8% north, respectively, in the past 30 days, reflecting analysts' optimism on the stock.

Will the Bull Run Continue?

The Zacks Consensus Estimate for Brown & Brown's 2024 earnings per share indicates an increase of 30.6% from the year-ago reported number. The consensus estimate for revenues is pegged at $4.68 billion, implying a year-over-year improvement of 10%.

The consensus estimate for 2025 earnings per share and revenues indicates an increase of 8.2% and 7.5%, respectively, from the corresponding 2024 estimates.

The expected long-term earnings growth is 11%. Earnings have increased 18.4% in the past five years, better than the industry average of 13.8%.

Commissions and fees, the main component of the top line, benefit from increasing new business, strong retention and continued rate increases for most lines of coverage. The top line witnessed a five-year annual growth rate of 14%. The company met its intermediate annual revenue goal of $4 billion, doubling in the last five years.

The insurance broker continually makes investments in boosting organic growth and margin expansion. It boasts an industry-leading adjusted EBITDAC margin.

Brown & Brown's strategic buyouts help it capitalize on growing market opportunities, strengthen its compelling products and service portfolio, expand global reach and accelerate its growth rate. For the second quarter of 2024, the insurance broker completed 10 acquisitions with estimated annual revenues of $13 million and continued to build relationships with many other companies.

Banking on operational expertise, BRO boasts a strong liquidity position with an improving leverage ratio. The strength of its operating model and diversity of businesses ensures strong cash conversion. The company effectively deploys cash into acquisitions, capital expenditure and wealth distribution for shareholders via dividend increases.

BRO has an impressive dividend history, raising dividends for 30 straight years. Its five-year annualized dividend growth is 10.6%, and its dividend yield is 0.5%.

Other Stocks to Consider

Some other top-ranked stocks from the insurance industry are Arthur J. Gallagher & Co. AJG, Willis Towers Watson Public Limited Company WTW and Ryan Specialty Holdings Inc. RYAN, each carrying a Zacks Rank #2 at present.

Arthur J. Gallagher's earnings surpassed estimates in each of the last four quarters, the average surprise being 1.93%. Shares of AJG have jumped 25.2% YTD. The Zacks Consensus Estimate for AJG's 2024 and 2025 earnings implies year-over-year growth of 15.8% and 12%, respectively.

Willis Towers Watson's earnings surpassed estimates in each of the last four quarters, the average surprise being 7.06%. Shares of WTW have jumped 14.3% YTD. The Zacks Consensus Estimate for WTW's 2024 and 2025 earnings implies year-over-year growth of 14.6% and 11.9%, respectively.

Ryan Specialty's earnings surpassed estimates in one of the last four quarters and matched in the other three, the average surprise being 0.4%. Shares of RYAN have jumped 52.1% YTD. The Zacks Consensus Estimate for RYAN's 2024 and 2025 earnings implies year-over-year growth of 31.1% and 21.9%, respectively.

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