Brown & Brown Inc. BRO is poised for long-term growth on the back of its prudent growth initiatives, solid capital position and effective capital deployment. The Zacks Consensus Estimate for 2019 earnings is pegged at $1.35, indicating 9.8% year-over-year increase on 15.9% higher revenues.
A compelling product portfolio has been helping the company generate strong commission and fees, which, in turn, has been fueling revenue growth. Brown & Brown estimates revenues between $210 million and $220 million in 2019
Apart from organic growth, Brown & Brown’s impressive growth is also driven by inorganic means. Strategic acquisitions and mergers help it spread its operations. In over a span of a little more than two decades, the company has acquired more than 470 insurance intermediary operations. The recent acquisition of Hays Companies is expected to generate $210 million to $220 million and $47 million to $53 million of EBITDAC in 2019. Also, the addition of Hays will drive revenue growth of more than 10% and EBITDAC growth of more than 8%.
Brown & Brown will be implementing an annual incentive program for its middle-market producers in the Retail division. This program is expected to fuel growth by focusing on customer retention and new business.
A sustained operational performance should continue to help maintain a solid capital position. Brown & Brown deploys capital effectively that in turn enhances its shareholders value. The company has raised its dividend for 25 years. Its dividend currently yields 1.2%.
Shares of this Zacks Rank #2 (Buy) insurance broker have gained 7.9% in a year, outperforming the industry’s 5.9% increase. The Zacks S&P 500 composite has however declined 6.8% in the same time frame.
Valuation looks attractive at current level as the price-to-book multiple of 2.62 is lower than the industry average of 4.66. Undervalued stocks with solid fundamentals are best investment bets.
The company’s expected long-term earnings growth is pegged at 10%.
Other Stocks to Consider
Investors interested in the insurance space can look at Cigna Corporation CI, MGIC Investment Corporation MTG and MetLife, Inc. MET. Each of the stocks carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.
Cigna provides health services, such as medical, dental, behavioral health, pharmacy, vision, supplemental benefits, among others. The company delivered 11.30% positive surprise in the last reported quarter.
MGIC Investment provides private mortgage insurance and ancillary services to lenders and government sponsored entities in the United States. The company delivered 33.33% positive surprise in the last reported quarter.
MetLife engages in the insurance, annuities, employee benefits, and asset management businesses. It came up with 10.40% positive surprise in the last reported quarter.
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