Brown & Brown Rallied 14% After Earnings But Growth Could Decelerate, Analyst Says

Shares of Brown & Brown, Inc. BRO have been on an uptrend, after the company announced a new revenue target for fiscal 2024.

The stock has rallied around 14%, after the company announced its earnings on Jan. 22, outperforming large-cap broker peers and S&P 500 each up +7%, which has “eroded upside,” according to BofA Securities.

The Brown & Brown Analyst: Grace Carter downgraded the rating for Brown & Brown from Neutral to Underperform, while raising the price target from $80 to $86.

The Brown & Brown Thesis: While the stock has rallied, the broker group continues to face growth and margin headwinds, Carter said in the downgrade note.

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“Broker organic growth is tightly correlated with nominal GDP growth and has recently benefited from higher inflation,” the analyst wrote. “As CPI decelerates, so should organic growth for brokers, incl. Brown & Brown,” she added.

Carter further stated that Brown & Brown’s growth could move towards historical levels over the next couple of years, reaching 6.4% and 4.6% in 2024 and 2025, respectively, compared to the 10.2% growth reported in 2023.

BRO Price Action: Shares of Brown & Brown had declined by 0.66% to $85.33 at the time of publication on Wednesday.

Image: Courtesy of Brown & Brown