Why Is Acxiom (ACXM) Up 13.6% Since Its Last Earnings Report?

A month has gone by since the last earnings report for Acxiom Corporation (NASDAQ:ACXM) . Shares have added about 13.6% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is ACXM due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Recent Earnings

Acxiom reported non-GAAP earnings of 31 cents per share in third-quarter fiscal 2018, beating the Zacks Consensus Estimate by 7 cents. The figure improved 29.2% from the year-ago quarter.

Revenues were $234.9 million, up 5.2% from the year-ago quarter but lagged the Zacks Consensus Estimate of $239 million. Excluding divestitures, Australia transition and foreign exchange effect, the company’s revenues increased 5%.

Adjusted domestic revenues were $213 million, up 5% year over year. Excluding revenues related to Australia transition and foreign exchange effect, international revenues increased 7% year over year to $21 million.

Acxiom also announced plans to realign portfolio into two distinct business units — LiveRamp and Acxiom Marketing Solutions. The company currently reports results into three units — Marketing Services, Audience Solutions and Connectivity. Beginning first-quarter fiscal 2019, Acxiom expects to report results under the realigned business units.

Segment Details

Revenues in the Marketing Services segment fell 7% year over year to $94 million. The company added three new customers during the quarter.

Marketing Services segment revenues from the U.S. markets were $88 million, down 6% year over year. International revenues fell 17% to $7 million.

Audience Solutions segment revenues inched up 1% to $84 million. Sales from the U.S. markets were $74 million, flat year over year. International revenues increased 9% to $10 million.

The Connectivity segment continued to show strong momentum, as revenues surged 45% year over year to $56 million.

Sales from the U.S. markets were $51 million, advancing 40% year over year. International revenues soared 100% to $5 million.

Acxiom’s partner network continues to expand. The company has partnered with the likes of Adobe Systems (NASDAQ:ADBE), Microsoft’s LinkedIn (NYSE:LNKD) and Yelp Local Audiences in the recent past. During the quarter, the company announced extended partnership with RedPoint Global and 4INFO.

Operating Details

Non-GAAP gross margin expanded 300 basis points (bps) on a year-over-year basis to 53.9%. Connectivity and Marketing Services segment gross margins surged 810 bps and 80 bps, respectively. Audience Solutions gross margin contracted 110 bps.

Reported operating expenses surged 10.4% to $107.9 million. Research and development (R&D) and Sales and marketing (S&M) increased 11.3% and 24.8%, respectively. However, General and administrative (G&A) declined 2.3% from the year-ago quarter.

Total segment operating margin expanded 60 bps to 26.4%. Connectivity and Marketing Services operating margin expanded 740 and 450 bps, respectively. However, Audience Solutions operating margin contracted 230 bps from the year-ago quarter.

Non-GAAP operating margin expanded 120 bps on a year-over-year basis to 16.2% in the reported quarter.

Balance Sheet & Cash Flow

As of Dec 31, 2017, Acxiom had cash and cash equivalents of approximately $177.8 million compared with $169.5 million as of Sep 31, 2017.

Cash flow from operations was $43.6 million, up from $27.8 million in the prior quarter.

Acxiom repurchased 729,000 shares for approximately $20 million.

Guidance

For fiscal 2018, Acxiom expects revenues in the range of $910-$915 million (down from previous range of $920-$930 million), up 6% (down from previous range 7-8%) from fiscal 2017. The slashed guidance reflects lower anticipated revenues from the Audience Solutions segment.

Non-GAAP earnings are projected in the range of 85-89 cents per share (down from previous range of 80-85 cents), up 20-25% year over year (previous range was 13-20% year over year). The current guidance includes tax reform benefit of 4-5 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter.

Acxiom Corporation Price and Consensus

Acxiom Corporation Price and Consensus | Acxiom Corporation Quote

VGM Scores

At this time, ACXM has a nice Growth Score of B, though it is lagging a lot on the momentum front with an F. The stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

The company's stock is suitable solely for growth based on our styles scores.

Outlook

Estimates have been broadly trending downward for the stock and the magnitude of this revision indicates a downward shift. Notably, ACXM has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.