Compass Point downgraded Brown & Brown (NYSE: BRO) from Buy to Neutral with a price target of $33.00 (from $36.00) following Q1 results.

Analyst Ken Billingsley states, "The integration of larger account business from Beecher Carlson coupled with the soon to be completed Wright Insurance Group Acquisition in 2Q14 will continue to add margin pressure in the near term. While the acquisitions will continue to evolve the company’s operation platform, BRO will not continue to enjoy pricing multiples in excess of its peer group in the near term. The acquisition of larger businesses, coupled with weakening margins (though still above the peer group), and the increased use of debt to fund transactions will generate more conservative valuations for BRO in the near term."

Commenting on Q1 results, the analyst said, "The company reported 1Q14 EPS of $0.36 versus the consensus estimate of $0.42. Revenue growth was 8.5%, but below our double digit expectation. Organic growth as reported by the company was 3.9%, but excludes higher revenue in 1Q13 related to Superstorm Sandy claims. Increased earn out contingencies added $6.1M to expenses (~$0.03 per share), though this means that recently acquired businesses are expected to generate more revenue than initially anticipated. The brokerage expense margin was 67.4%, and nearly 400 bps higher than our estimate. The bulk of the increase relates to higher compensation and benefits."

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Shares of Brown & Brown closed at $28.91 yesterday.