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Morgan Stanley sees upside for Brown & Brown stock with EPS set to climb in 2025-26

EditorEmilio Ghigini
Published 12/05/2024, 06:38 PM
BRO
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On Thursday, Morgan Stanley (NYSE:MS) initiated coverage on Brown & Brown (NYSE:NYSE:BRO) stock with an Overweight rating and a price target of $134.00, citing the company's industry-leading margins and potential for continued growth and margin accretion. The firm's analysis suggests that Brown & Brown's strong performance track record is not fully appreciated by the market.

The Overweight rating is based on the expectation that Brown & Brown will achieve approximately $2,081 million in adjusted EBITDAC by 2026, which would reflect a 36.5% margin. This robust margin is projected to be a result of the company's ability to grow revenues at an estimated 8.1% in 2025 and 7.2% in 2026, with organic growth year over year, primarily driven by the Retail segment's strong performance.

Morgan Stanley's price target of $134.00 is derived from a 2026 estimated EV/EBITDAC multiple of around 17.8x and a P/E multiple of approximately 28.5x. These multiples represent a premium to Brown & Brown's peers, justifying the firm's positive outlook on the stock.

The financial institution also projects that the insurance broker's revenue growth will translate into earnings per share (EPS) of $4.22 in 2025 and $4.70 in 2026. The projections are based on the company's ability to sustain its growth trajectory and maintain its competitive edge in the market.

The analyst underscored the company's potential for long-term growth and margin improvement, emphasizing that Brown & Brown's profitability profile is poised for recognition. The firm's optimistic stance reflects confidence in the company's strategic direction and market positioning.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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