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Earnings Beat: Brown & Brown, Inc. Just Beat Analyst Forecasts, And Analysts Have Been Updating Their Models

Brown & Brown, Inc. (NYSE:BRO) investors will be delighted, with the company turning in some strong numbers with its latest results. Brown & Brown beat earnings, with revenues hitting US$699m, ahead of expectations, and statutory earnings per share outperforming analyst reckonings by a solid 18%. 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. With this in mind, we've gathered the latest statutory forecasts to see what the analysts are expecting for next year.

View our latest analysis for Brown & Brown

NYSE:BRO Past and Future Earnings April 29th 2020
NYSE:BRO Past and Future Earnings April 29th 2020

Following last week's earnings report, Brown & Brown's eight analysts are forecasting 2020 revenues to be US$2.45b, approximately in line with the last 12 months. Statutory earnings per share are forecast to reduce 5.8% to US$1.46 in the same period. Yet prior to the latest earnings, the analysts had been anticipated revenues of US$2.44b and earnings per share (EPS) of US$1.42 in 2020. The analysts seems to have become more bullish on the business, judging by their new earnings per share estimates.

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There's been no major changes to the consensus price target of US$39.80, suggesting that the improved earnings per share outlook is not enough to have a long-term positive impact on the stock's valuation. There's another way to think about price targets though, and that's to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. There are some variant perceptions on Brown & Brown, with the most bullish analyst valuing it at US$46.00 and the most bearish at US$38.00 per share. The narrow spread of estimates could suggest that the business' future is relatively easy to value, or thatthe analysts have a strong view on its prospects.

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. These estimates imply that sales are expected to slow, with a forecast revenue decline of 0.5%, a significant reduction from annual growth of 8.4% over the last five years. Compare this with our data, which suggests that other companies in the same industry are, in aggregate, expected to see their revenue grow 1.1% next year. It's pretty clear that Brown & Brown's revenues are expected to perform substantially worse 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. On the plus side, there were no major changes to revenue estimates; although forecasts imply revenues will perform worse 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 said, the long-term trajectory of the company's earnings is a lot more important than next year. We have estimates - from multiple Brown & Brown analysts - going out to 2022, and you can see them free on our platform here.

However, before you get too enthused, we've discovered 2 warning signs for Brown & Brown that you should be aware of.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Thank you for reading.