Brown & Brown Net Income Up 15%; Misses 3Q Earnings Target by 1 Cent

By Mark E. Ruquet

Brown & Brown 3Q net income Rises 15%,
but Beecher Carlson acquisition costs
earnings by 1 cent a share 

When a company increases its net income by almost 15 percent one would think there would be celebration. Instead, the first note I see is that Daytona Beach, Fla.-based insurance broker Brown & Brown missed the consensus-earning target by 1 cent.

Is there something wrong with this picture? The NYSE will make its judgment by the end of today, but in the meantime, a net income of close to $58 million for the third quarter sounds pretty good, translated to 39 cents a share, up 4 cents from the same period last year. Revenues jumped more than 18 percent, or $55.5 million to more than $359 million.

J. Powell Brown, President and Chief Executive Officer said one-time, non-recurring acquisition-related expenses accounted for 1 cent per share.  In a statement, he went on to say “all four of our business divisions enjoyed strong quarterly organic revenue growth rates, most notably our wholesale brokerage division," which grew by 16 percent.

Net income for the nine months $167 million, up close to 20 percent to $1.16  share, an increase of 19 cents a share. Total revenue for the nine months was $1.02 billion, up $123 million or almost 14 percent.

Brown & Brown is one of a few brokerage firms with an aggressive growth strategy that involves the acquisition of agencies with revenues ranging from $2-$10 million. However, out of character, the broker made a major acquisition in May buying Beecher Carlson Holdings Inc. for $336.5 million from a private equity firm. Brown called it an opportunity that it could not pass up, allowing Brown & Brown greater access to the niche large account business.