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.
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