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MSCI (MSCI) Down 3.9% Since Last Earnings Report: Can It Rebound?
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It has been about a month since the last earnings report for MSCI (MSCI - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MSCI due for a breakout? 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.
MSCI Q1 Earnings and Revenues Beat Estimates
MSCI’s first-quarter 2021 adjusted earnings of $2.46 per share beat the Zacks Consensus Estimate by 7.4% and increased 29.5% from the year-ago quarter.
Operating revenues improved 14.8% year over year to $478.4 million and beat the consensus mark by 1.5%. This year-over-year growth was driven by 10.9% and 26.5% rise in recurring subscriptions (70.6% of revenues) and asset-based fees (26.5% of revenues), respectively.
Non-recurring revenues (2.9% of revenues) increased 15% year over year to $14 million.
At the end of the quarter, average assets under management were $1.21 trillion in ETFs linked to MSCI indexes. Total retention rate was 96.3% in the quarter under review.
Revenue Details
In the first quarter, Index operating revenues improved 17.3% year over year to $292.5 million, primarily driven by growth in recurring subscriptions (up 10.9%) and asset-based fees (up 26.5%).
Higher recurring subscriptions were driven by growth in market-cap weighted products.
Analytics operating revenues improved 6.8% year over year to $134 million. While recurring subscription revenues increased 6.1%, non-recurring revenues surged 62.5%.
ESG and Climate segment operating revenues increased 37.7% from the year-ago quarter to $34.8 million, primarily driven by strong growth from Ratings products, including Climate products. ESG and Climate operating revenues grew 31.8% on an organic basis.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $17.2 million, up 2.3% year over year.
Operating Details
Adjusted EBITDA increased 20.7% year over year to $276.6 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 280 basis points (bps) on a year-over-year basis to 57.8%.
Total operating expenses increased 7.3% on a year-over-year basis to $224 million. General & administrative, and selling & marketing expenses increased 12.6% and 1.7%, respectively. Moreover, research & development expenses fell 6.4% year over year.
Operating income improved 22.4% from the year-ago quarter to $254.4 million. Operating margin expanded 330 bps to 53.2%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Mar 31, 2021, were $1.7 billion compared with $1.3 billion as of Dec 31, 2020.
Total debt was $3.9 billion as of Mar 31. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.8 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $215.5 million in the first quarter, up 91.1% year over year. Free cash flow was $205.1 million, up 101.2% year over year.
In the first quarter, MSCI repurchased 329,508 million shares for a total value of $134.3 million. Notably, $1.6 billion is outstanding under the share-repurchase authorization as of Apr 23, 2021.
MSCI also paid out dividends worth $64.6 million in the first quarter.
Guidance
For 2021, MSCI expects total operating expenses of $885-$920 million, up from the previous guidance range of $870-$895 million. Adjusted EBITDA expenses are expected between $795 million and $825 million, up from the previous guidance range of $780-$800 million.
Capex is still expected to be $50-$60 million.
Moreover, net cash provided by operating activities and free cash flow is expected to be $885-$925 million and $845-$885 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, MSCI has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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MSCI (MSCI) Down 3.9% Since Last Earnings Report: Can It Rebound?
It has been about a month since the last earnings report for MSCI (MSCI - Free Report) . Shares have lost about 3.9% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MSCI due for a breakout? 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.
MSCI Q1 Earnings and Revenues Beat Estimates
MSCI’s first-quarter 2021 adjusted earnings of $2.46 per share beat the Zacks Consensus Estimate by 7.4% and increased 29.5% from the year-ago quarter.
Operating revenues improved 14.8% year over year to $478.4 million and beat the consensus mark by 1.5%. This year-over-year growth was driven by 10.9% and 26.5% rise in recurring subscriptions (70.6% of revenues) and asset-based fees (26.5% of revenues), respectively.
Non-recurring revenues (2.9% of revenues) increased 15% year over year to $14 million.
At the end of the quarter, average assets under management were $1.21 trillion in ETFs linked to MSCI indexes. Total retention rate was 96.3% in the quarter under review.
Revenue Details
In the first quarter, Index operating revenues improved 17.3% year over year to $292.5 million, primarily driven by growth in recurring subscriptions (up 10.9%) and asset-based fees (up 26.5%).
Higher recurring subscriptions were driven by growth in market-cap weighted products.
Analytics operating revenues improved 6.8% year over year to $134 million. While recurring subscription revenues increased 6.1%, non-recurring revenues surged 62.5%.
ESG and Climate segment operating revenues increased 37.7% from the year-ago quarter to $34.8 million, primarily driven by strong growth from Ratings products, including Climate products. ESG and Climate operating revenues grew 31.8% on an organic basis.
All Other revenues, which primarily comprise of the Real Estate operating segment, were $17.2 million, up 2.3% year over year.
Operating Details
Adjusted EBITDA increased 20.7% year over year to $276.6 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 280 basis points (bps) on a year-over-year basis to 57.8%.
Total operating expenses increased 7.3% on a year-over-year basis to $224 million. General & administrative, and selling & marketing expenses increased 12.6% and 1.7%, respectively. Moreover, research & development expenses fell 6.4% year over year.
Operating income improved 22.4% from the year-ago quarter to $254.4 million. Operating margin expanded 330 bps to 53.2%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Mar 31, 2021, were $1.7 billion compared with $1.3 billion as of Dec 31, 2020.
Total debt was $3.9 billion as of Mar 31. Total-debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.8 times, higher than management’s target range of 3-3.5 times.
Net cash provided by operating activities was $215.5 million in the first quarter, up 91.1% year over year. Free cash flow was $205.1 million, up 101.2% year over year.
In the first quarter, MSCI repurchased 329,508 million shares for a total value of $134.3 million. Notably, $1.6 billion is outstanding under the share-repurchase authorization as of Apr 23, 2021.
MSCI also paid out dividends worth $64.6 million in the first quarter.
Guidance
For 2021, MSCI expects total operating expenses of $885-$920 million, up from the previous guidance range of $870-$895 million. Adjusted EBITDA expenses are expected between $795 million and $825 million, up from the previous guidance range of $780-$800 million.
Capex is still expected to be $50-$60 million.
Moreover, net cash provided by operating activities and free cash flow is expected to be $885-$925 million and $845-$885 million, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates review.
VGM Scores
Currently, MSCI has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.