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Tuesday, Goldman Sachs adjusted its stance on Brown & Brown (NYSE:BRO), downgrading the stock from Buy to Neutral with a new price target (PT) of $119.00. The decision comes as the firm anticipates the insurance broker’s organic growth to align more closely with that of its peers, potentially impacting the company’s higher valuation multiple.
Brown & Brown has seen significant growth since being added to Goldman Sachs’ Americas Buy List on January 8, 2024. The company’s shares have experienced a total return of 55.2%, outpacing the Retail insurance brokers coverage universe’s 37.3% return, the S&P Insurance index’s 28.1% increase, and the S&P 500’s 18.8% gain. In absolute terms, Brown & Brown’s share price performance stood at 54.2% compared to the S&P 500’s 18.8% since the same date.
The downgrade reflects a recalibration of expectations in the face of changing market conditions. Goldman Sachs’ revised 12-month target price represents a $7 decrease from the previous target, equating to a 6% reduction. Despite this adjustment, the new target still suggests a 7% total return opportunity for Brown & Brown over the next year.
The insurance broker’s performance has been robust over the past year and a half, but Goldman Sachs believes that the coming period may see a moderation in growth rates. This anticipated reversion to the mean is a key factor in the firm’s reassessment of Brown & Brown’s stock prospects.
Investors and market watchers will be keeping a close eye on Brown & Brown’s performance in the upcoming quarters, as the company adjusts to market dynamics and strives to maintain its growth trajectory in a competitive industry landscape.
In other recent news, Brown & Brown, Inc. reported its financial results for the first quarter of 2025, meeting earnings per share (EPS) expectations but slightly missing revenue forecasts. The company achieved an EPS of $1.29, in line with analysts’ predictions, while revenue was $1.4 billion, just under the anticipated $1.41 billion. Despite the revenue shortfall, Brown & Brown demonstrated strong year-over-year revenue growth of 11.6%, with income before income taxes rising by 17.4%. In addition to its financial performance, Brown & Brown completed 13 acquisitions, including the purchase of Mississippi-based Tim Parkman, Inc. through its Bridge Specialty Group. The acquisition aims to enhance Brown & Brown’s service offerings, although the financial terms were not disclosed. Analysts from Truist Securities and BMO raised inquiries during the earnings call regarding the company’s market dynamics and future expectations. Brown & Brown expressed a cautious outlook due to inflation and interest rate uncertainties, but remains optimistic about continued economic expansion. The company anticipates low to mid-single-digit organic growth moving forward, with margins expected to remain consistent.
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