Meyer Shields, Analyst with Stifel, Nicolaus & Co., says Brown & Brown, Inc. (BRO) has had challenges lately with organic growth and margin expansion. He says much of the company’s quarterly lumpiness is a result of new seasonality from Brown & Brown’s acquisition of Beecher Carlson.
“There was an expectation in the first quarter of this year that margins would be more impressive, and that hasn’t happened,” Shields says. “Not so much because things aren’t working the way management was trying, but because there is a seasonality that’s relatively new to Brown & Brown, and as that seasonality demonstrates its positive nuance, in other words in the second quarter where you get disproportionate amounts of revenues, but again the same expense rate, it should see more margin expansion.”
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Shields also is positive about Brown & Brown because the benefits of economic recovery are supporting revenue growth through insurance brokers. And, he says the current environment is a good one for brokers to make acquisitions.
“We have seen a number of eight- or nine-digit revenue brokers that have been sold recently instead of seeing themselves as an appropriate starting point to be an acquirer, and Brown & Brown, among others, has benefited from the availability of a lot of these large properties in addition to I think the availability of many, many small books,” Shields says.
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