On Tuesday, Raymond James demonstrated confidence in Brown & Brown, Inc. (NYSE: BRO), as the firm increased its price target on the company's stock to $95 from $90, while maintaining an Outperform rating.
The financial services firm projects that Brown & Brown will continue to exhibit strong organic growth through 2025, supported by above-average adjusted EBITDAC margins and free cash flow (FCF) conversion rates.
The analyst's outlook for Brown & Brown is based on the expectation that the company will sustain organic growth rates higher than its historical average. This is anticipated to result from a combination of factors, including a favorable, though moderating, commercial lines pricing environment, robust client retention, and new business wins. These elements are expected to drive the company's performance in the near future.
For the first quarter of 2024, Raymond James foresees an approximate $8 million headwind to Brown & Brown's organic growth within its Programs segment. This is attributed to claims revenue recorded in the first quarter of 2023.
Conversely, in the fourth quarter of 2024, the company is expected to benefit from a roughly $19 million payment related to captive reinsurance changes that occurred in the fourth quarter of 2023, which should serve as a tailwind to organic growth in the Programs segment.
The firm also anticipates that Brown & Brown will generate substantial free cash flow, which could potentially exceed current revenue estimates if the company successfully completes additional acquisitions. This strong FCF is seen as a key driver for the company's ability to invest and grow further, underpinning the raised price target and positive rating.
InvestingPro Insights
Recent data from InvestingPro underscores the strong financial standing of Brown & Brown, Inc. (NYSE: BRO), complementing Raymond James's positive outlook. Notably, Brown & Brown has demonstrated a commendable track record with a 24.66B USD market cap and a robust revenue growth of 17.88% over the last twelve months as of Q4 2023. This aligns with the analyst's projections of sustained organic growth for the company.
The InvestingPro Tips highlight Brown & Brown's consistency in rewarding shareholders, having raised its dividend for 31 consecutive years and maintained dividend payments for 39 years. Additionally, the company has shown a strong return over the last year with a 56.25% price total return, which may interest investors looking for both growth and income.
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