RBC Capital Markets has updated its outlook on Verisk Analytics (NASDAQ: NASDAQ:VRSK), a leading data analytics provider.
The firm raised its price target on the stock to $300.00 from the previous $268.00, while maintaining an Outperform rating.
The revision reflects an anticipation of improved growth towards the end of the year and positive trends for the following year.
The analyst from RBC Capital pointed out that despite facing tough comparisons and weaker trends in Auto insurance shopping, CAT bond issuance, and a shift to subscription models impacting transaction revenue growth in the third quarter of 2024, expectations are set for a rebound in the fourth quarter. This optimism is due to easier comparisons and benefits from hurricane activity, specifically from Hurricanes Helene and Milton.
Verisk's robust subscription growth, which is anticipated to be around 8% on an organic constant currency basis, is a key driver for the positive outlook.
The growth is expected to stem from various product offerings, including forms, rules, loss costs, anti-fraud analytics, and extreme event solutions. Moreover, a pickup in Auto insurance marketing is seen as a favorable sign for the fiscal year 2025.
The analyst also highlighted the potential for sustained pricing tailwinds in 2025, attributed to the industry's typical two-year lag in pricing adjustments. Additionally, a healthy insurance market coupled with changes to sales incentives is predicted to bolster cross-selling efforts, further supporting Verisk's growth trajectory.
In other recent news, Verisk, a leading data analytics and technology firm, has estimated insured losses from Hurricane Helene in the U.S. to be between $6 billion and $11 billion. The company has also expanded its digital trading platform, Whitespace, to the U.S. market, aiming to streamline the placement of (re)insurance business.
Verisk reported a year-over-year revenue increase of 6.2% to $717 million in its Q2 2024 results, primarily driven by an 8.3% increase in subscription revenue. Analyst firms Evercore ISI, Baird, Deutsche Bank, BMO Capital Markets, and Jefferies have all provided recent updates on their ratings and price targets for Verisk. Additionally, Verisk initiated a $150 million accelerated share repurchase program.
InvestingPro Insights
To complement the positive outlook presented by RBC Capital Markets, recent data from InvestingPro provides additional context on Verisk Analytics' (NASDAQ:VRSK) financial performance and market position.
As of the last twelve months ending Q2 2024, Verisk reported impressive gross profit margins of 67.91%, underscoring the company's efficiency in its core operations. This aligns with one of the InvestingPro Tips, which highlights Verisk's "impressive gross profit margins." The company's ability to maintain such margins could be a key factor in its anticipated growth and ability to capitalize on the positive trends mentioned in the article.
Another relevant InvestingPro Tip notes that Verisk "has raised its dividend for 5 consecutive years." This consistent dividend growth, coupled with a recent dividend growth rate of 14.71%, demonstrates the company's commitment to returning value to shareholders and could be seen as a sign of financial health and management confidence in future performance.
Lastly, Verisk's revenue growth of 8.12% over the last twelve months supports the analyst's projection of robust subscription growth around 8% on an organic constant currency basis. This alignment between actual performance and analyst expectations lends credibility to the positive outlook for the company.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Verisk Analytics, providing a deeper understanding of the company's financial position and market performance.
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