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Why Is Verisk (VRSK) Down 2.7% Since the Last Earnings Report?
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A month has gone by since the last earnings report for Verisk Analytics, Inc. (VRSK - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it 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 drivers.
Verisk Beats Q4 Earnings Estimates on Holistic Growth
Verisk reported solid fourth-quarter 2016 results with adjusted earnings from continuing operations of $0.80 per share, up from $0.74 in the year-ago quarter. Adjusted earnings comfortably beat the Zacks Consensus Estimate of $0.77. The improvement in adjusted earnings was primarily driven by healthy organic and inorganic growth and lower interest expenses, partially offset by high depreciation and taxes.
Net income from continuing operations remained relatively flat at $107.5 million or $0.63 per share compared with $108.0 million or $0.63 per share in the prior-year quarter. For full-year 2016, GAAP income from continuing operations was $451.5 million or $2.64 per share compared with $487.5 million or $2.89 per share in 2015. Adjusted earnings from continuing operations in 2016 improved 8.4% year over year to $3.11 per share.
Total revenue for the reported quarter increased to $506.1 million from $477.4 million in the prior-year period due to solid organic growth, but marginally missed the Zacks Consensus Estimate of $507 million. For the full year, revenues were $1,995.2 million compared with $1,760.7 million in 2015. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) from continuing operations for the quarter increased 7% year over year to $257.8 million
Segmental Performance
Decision Analytics segment’s revenues from continuing operations increased 6.5% to $323.5 million and accounted for 63.9% of total revenue. Energy and Specialized Markets category revenues declined marginally to $109.7 million. Insurance category revenues increased 7.5% to $178.3 million on solid underwriting solutions growth. Financial Services category revenues were up 27.3% year over year to $35.5 million, driven by analytical and media effectiveness solutions.
Risk Assessment segment’s revenues grew 5.1% to $182.6 million, accounting for 36.1% of total revenue. Property-specific rating and underwriting information revenues grew 2.6% to $42.7 million, driven by an increase in underwriting solutions subscription revenues. Industry-standard insurance programs revenues were up 5.9% to $139.9 million, primarily attributable to growth in new solutions.
Acquisitions
During the quarter, Verisk acquired The GeoInformation Group, a premier provider of geographic data solutions, for an undisclosed amount. GeoInformation leverages on high-resolution aerial imagery to obtain accurate and in-depth geospatial data for key public sector entities. The strategic transaction will fortify Verisk’s footprint in the U.K. and cement its position as a premier data and analytics services provider across multiple markets, including insurance, energy, and real estate. At the same time, GeoInformation's complementary product portfolio will supplement Verisk’s risk management and predictive analytics capabilities across the globe.
The company also acquired MarketStance, a primary provider of market intelligence and analytics services in the insurance industry. The transaction will fortify Verisk’s foothold in the insurance industry by leveraging MarketStance’s proprietary analytics model to provide actionable insights.
Subsequent to the end of the quarter, Verisk purchased Arium, a liability risk modeling and decision support firm, for an undisclosed amount. Formed in 1998, Arium or Architects for Risk Identification, Understanding, and Management specializes in developing risk models, mainly for the reinsurance industry. The company uses a unique methodology based on dependency theory. Its casualty analytics platform enables other companies to run historical and emerging scenarios and build their own scenarios across all casualty lines. Incorporating Arium’s methodologies will enable Verisk’s clients to comprehensively manage risks across their portfolios in the casualty market. We expect the acquisitions to be accretive for the company in the near future.
Balance Sheet and Cash Flow
At year-end 2016, Verisk had about $135.1 million in cash and cash equivalents with long-term debt of $2,280.2 million compared with the respective tallies of $138.3 million and $2,270.9 million in the year-ago period. Net cash generated from operating activities in 2016 was $546.1 million compared with $623.7 million in 2015, resulting in respective free cash flows of $378.8 million and $411.8 million.
Verisk repurchased 1.8 million shares for $144 million during the quarter. At the year end, the company had $636 million worth of shares remaining under its share repurchase authorization.
Moving Forward
Verisk continues to deliver outstanding data analytics solutions to its customers across its core verticals of insurance, natural resources, and financial services. The company’s ability to generate strong cash enables it to meet its deleveraging objectives and helps it invest on behalf of its shareholders.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been four downward revisions for the current quarter.
At this time, Verisk's stock has a poor Growth Score of 'F', 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 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.
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Why Is Verisk (VRSK) Down 2.7% Since the Last Earnings Report?
A month has gone by since the last earnings report for Verisk Analytics, Inc. (VRSK - Free Report) . Shares have lost about 2.7% in that time frame, underperforming the market.
Will the recent negative trend continue leading up to the stock’s next earnings release, or is it 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 drivers.
Verisk Beats Q4 Earnings Estimates on Holistic Growth
Verisk reported solid fourth-quarter 2016 results with adjusted earnings from continuing operations of $0.80 per share, up from $0.74 in the year-ago quarter. Adjusted earnings comfortably beat the Zacks Consensus Estimate of $0.77. The improvement in adjusted earnings was primarily driven by healthy organic and inorganic growth and lower interest expenses, partially offset by high depreciation and taxes.
Net income from continuing operations remained relatively flat at $107.5 million or $0.63 per share compared with $108.0 million or $0.63 per share in the prior-year quarter. For full-year 2016, GAAP income from continuing operations was $451.5 million or $2.64 per share compared with $487.5 million or $2.89 per share in 2015. Adjusted earnings from continuing operations in 2016 improved 8.4% year over year to $3.11 per share.
Total revenue for the reported quarter increased to $506.1 million from $477.4 million in the prior-year period due to solid organic growth, but marginally missed the Zacks Consensus Estimate of $507 million. For the full year, revenues were $1,995.2 million compared with $1,760.7 million in 2015. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) from continuing operations for the quarter increased 7% year over year to $257.8 million
Segmental Performance
Decision Analytics segment’s revenues from continuing operations increased 6.5% to $323.5 million and accounted for 63.9% of total revenue. Energy and Specialized Markets category revenues declined marginally to $109.7 million. Insurance category revenues increased 7.5% to $178.3 million on solid underwriting solutions growth. Financial Services category revenues were up 27.3% year over year to $35.5 million, driven by analytical and media effectiveness solutions.
Risk Assessment segment’s revenues grew 5.1% to $182.6 million, accounting for 36.1% of total revenue. Property-specific rating and underwriting information revenues grew 2.6% to $42.7 million, driven by an increase in underwriting solutions subscription revenues. Industry-standard insurance programs revenues were up 5.9% to $139.9 million, primarily attributable to growth in new solutions.
Acquisitions
During the quarter, Verisk acquired The GeoInformation Group, a premier provider of geographic data solutions, for an undisclosed amount. GeoInformation leverages on high-resolution aerial imagery to obtain accurate and in-depth geospatial data for key public sector entities. The strategic transaction will fortify Verisk’s footprint in the U.K. and cement its position as a premier data and analytics services provider across multiple markets, including insurance, energy, and real estate. At the same time, GeoInformation's complementary product portfolio will supplement Verisk’s risk management and predictive analytics capabilities across the globe.
The company also acquired MarketStance, a primary provider of market intelligence and analytics services in the insurance industry. The transaction will fortify Verisk’s foothold in the insurance industry by leveraging MarketStance’s proprietary analytics model to provide actionable insights.
Subsequent to the end of the quarter, Verisk purchased Arium, a liability risk modeling and decision support firm, for an undisclosed amount. Formed in 1998, Arium or Architects for Risk Identification, Understanding, and Management specializes in developing risk models, mainly for the reinsurance industry. The company uses a unique methodology based on dependency theory. Its casualty analytics platform enables other companies to run historical and emerging scenarios and build their own scenarios across all casualty lines. Incorporating Arium’s methodologies will enable Verisk’s clients to comprehensively manage risks across their portfolios in the casualty market. We expect the acquisitions to be accretive for the company in the near future.
Balance Sheet and Cash Flow
At year-end 2016, Verisk had about $135.1 million in cash and cash equivalents with long-term debt of $2,280.2 million compared with the respective tallies of $138.3 million and $2,270.9 million in the year-ago period. Net cash generated from operating activities in 2016 was $546.1 million compared with $623.7 million in 2015, resulting in respective free cash flows of $378.8 million and $411.8 million.
Verisk repurchased 1.8 million shares for $144 million during the quarter. At the year end, the company had $636 million worth of shares remaining under its share repurchase authorization.
Moving Forward
Verisk continues to deliver outstanding data analytics solutions to its customers across its core verticals of insurance, natural resources, and financial services. The company’s ability to generate strong cash enables it to meet its deleveraging objectives and helps it invest on behalf of its shareholders.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. There have been four downward revisions for the current quarter.
Verisk Analytics, Inc. Price and Consensus
Verisk Analytics, Inc. Price and Consensus | Verisk Analytics, Inc. Quote
VGM Scores
At this time, Verisk's stock has a poor Growth Score of 'F', 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 'F'. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate investors will probably be better served looking elsewhere.
Outlook
Estimates have been broadly trending downward for the stock. The magnitude of these revisions also indicates a downward shift. Interestingly, the stock has a Zacks Rank #3 (Hold). We are expecting an inline return from the stock in the next few months.