It has been about a month since the last earnings report for Broadridge Financial Solutions (BR). Shares have added about 2.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Broadridge Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Broadridge Lags on Q2 Earnings and Revenue Estimates
Broadridge Financial Solutions reported disappointing second-quarter fiscal 2019 results, with earnings and revenues lagging the Zacks Consensus Estimate.
Adjusted earnings of 56 cents per share missed the consensus mark by 15 cents and declined 29% on a year-over-year basis. Total revenues of $953 million lagged the consensus mark by $17 million and fell 6% year over year.
Revenues by Segment
Revenues in the Investor Communication Solutions segment fell 8% from the year-ago quarter’s level to $738 million. The decrease was due to fall in event-driven and distribution revenues, partially offset by increase in recurring fee revenues.
Global Technology and Operations segment revenues came in at $237 million, up 4% from the year-ago quarter’s tally. The figure was driven by internal growth from higher trade levels and net new business from closed sales.
Revenues by Type
Recurring fee revenues of $604 million rose 7% from the year-ago quarter’s level and were driven by organic growth, recent acquisitions and impact of revenue accounting change. Event-driven fee revenues of $48 million plunged 51% year over year, mainly due to lower mutual fund proxy revenues and equity proxy contests.
Distribution revenues were down 13% year over year to $323 million. Changes in foreign currency rates negatively impacted revenues by $4 million compared with the prior-year quarter’s period.
Operating Results
Adjusted operating income of $101 million fell 27% year over year. Adjusted operating income margin decreased to 10.6% from 13.7% in the prior-year quarter. Decline in event-driven fee revenues, higher selling expenses and increased spending on technology initiatives led to margin contraction.
Balance Sheet and Cash Flow
Broadridge exited second-quarter fiscal 2019 with cash and cash equivalents of $249.8 million compared with $204.7 million at the end of prior quarter. Long-term debt was $1.19 billion compared with $1.14 billion at the end of the prior quarter.
The company generated $177.6 million of cash from operating activities and spent $12.3 million on capex in the quarter. Non-GAAP free cash flow was $162.8 million. Broadridge paid $56.5 million in dividends in the reported quarter.
Fiscal Third Quarter Guidance
Management expects total revenues in the range of $1,195-$1,245 million. Recurring fee revenue growth is anticipated between $755 million and $780 million. Adjusted EPS are expected in the range of $1.40-$1.56 per share. The Zacks Consensus Estimate is pegged at $1.56.
Fiscal 2019 Guidance
Broadridge reaffirmed guidance for fiscal 2019. Total revenues are expected to grow in the range of 3-5%. Recurring fee revenue growth is anticipated in the 5-7% range. Adjusted EPS are expected to register 9-13% growth. Adjusted operating income margin is estimated to register approximately 16.5% growth. Non-GAAP free cash flow is projected in the range of $565-$615 million.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a flat path over the past two months.
VGM Scores
At this time, Broadridge Financial has a nice Growth Score of B, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Broadridge Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
Broadridge Financial Solutions, Inc. (BR): Free Stock Analysis Report
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