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DST Systems (DST) Looks Promising: Should You Buy the Stock?
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Shares of DST Systems Inc. have been clocking solid returns in the past one year and has surged approximately 5.8%, outperforming the industry’s gain of 5.4%.
To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors' radar. So, the period following earnings releases is often marked by high market activity. Moreover, indicators of a stock's bullish run include continued uptrend in estimates and strong fundamentals.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for DST Systems’ fiscal 2017 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2017 is currently pegged at $3.08 per share compared with $3.04 projected 30 days ago.
Earnings Discussion
DST Systems reported stellar third-quarter 2017 results. The company’s non-GAAP earnings of 76 cents per share beat the Zacks Consensus Estimate of 73 cents. Total revenues during the quarter came in at $562.6 million, up 45.5% from the year-ago quarter. Excluding out-of-the-pocket reimbursements, consolidated operating revenues increased 43.6% year over year to $524.8 million, surpassing the Zacks Consensus Estimate of $511 million. The year-over-year increase was primarily due to synergies from Boston Financial Data Services ("BFDS") and International Financial Data Services U.K. ("IFDS U.K.") acquisitions.
Other Driving Factors
We believe that DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are the other encouraging factors.
The company also has a strong business model. It generates recurring revenues and a good percentage of its business comes from long-term contracts with customers. The company has developed the fee structure on a per-account and per-transaction basis, which indicates the fixed and flexible portion of revenues with respect to each client. Financial services companies that use DST System’s software to service multiple such clients generate incremental revenues with each additional client and/or transaction. The model ensures a minimum revenue level even when there are limited transactions.
Additionally, the long-term EPS growth rate is currently an impressive 10%, suggesting pretty good prospects for the long haul. The company also delivered positive earnings surprises in three of the trailing four quarters with an average beat of 6.4%.
Bottom Line
Looking at these positives, we believe that DST Systems is one technology stock that deserves a place in investors’ portfolio. Consequently, investing in this stock can yield returns in the short term.
Zacks Rank & Other Picks
Currently, DST Systems carries a Zacks Rank #2 (Buy).
Applied Materials, NVIDIA and Micron have a long-term expected EPS growth rate of 17.1%, 10.3% and 10%, respectively.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
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DST Systems (DST) Looks Promising: Should You Buy the Stock?
Shares of DST Systems Inc. have been clocking solid returns in the past one year and has surged approximately 5.8%, outperforming the industry’s gain of 5.4%.
To some investors, choosing the stock may appear to be a no-brainer because right after an earnings release, a company is almost always on investors' radar. So, the period following earnings releases is often marked by high market activity. Moreover, indicators of a stock's bullish run include continued uptrend in estimates and strong fundamentals.
Upward Estimate Revisions
In the last 30 days, the Zacks Consensus Estimate for DST Systems’ fiscal 2017 witnessed upward revisions. The Zacks Consensus Estimate for fiscal 2017 is currently pegged at $3.08 per share compared with $3.04 projected 30 days ago.
Earnings Discussion
DST Systems reported stellar third-quarter 2017 results. The company’s non-GAAP earnings of 76 cents per share beat the Zacks Consensus Estimate of 73 cents. Total revenues during the quarter came in at $562.6 million, up 45.5% from the year-ago quarter. Excluding out-of-the-pocket reimbursements, consolidated operating revenues increased 43.6% year over year to $524.8 million, surpassing the Zacks Consensus Estimate of $511 million. The year-over-year increase was primarily due to synergies from Boston Financial Data Services ("BFDS") and International Financial Data Services U.K. ("IFDS U.K.") acquisitions.
Other Driving Factors
We believe that DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are the other encouraging factors.
The company also has a strong business model. It generates recurring revenues and a good percentage of its business comes from long-term contracts with customers. The company has developed the fee structure on a per-account and per-transaction basis, which indicates the fixed and flexible portion of revenues with respect to each client. Financial services companies that use DST System’s software to service multiple such clients generate incremental revenues with each additional client and/or transaction. The model ensures a minimum revenue level even when there are limited transactions.
Additionally, the long-term EPS growth rate is currently an impressive 10%, suggesting pretty good prospects for the long haul. The company also delivered positive earnings surprises in three of the trailing four quarters with an average beat of 6.4%.
Bottom Line
Looking at these positives, we believe that DST Systems is one technology stock that deserves a place in investors’ portfolio. Consequently, investing in this stock can yield returns in the short term.
Zacks Rank & Other Picks
Currently, DST Systems carries a Zacks Rank #2 (Buy).
Other top-ranked stocks in the broader technology sector include Applied Materials, Inc. (AMAT - Free Report) , NVIDIA Corporation (NVDA - Free Report) and Micron Technology, Inc. (MU - Free Report) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Applied Materials, NVIDIA and Micron have a long-term expected EPS growth rate of 17.1%, 10.3% and 10%, respectively.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors.
Click here for Zacks' secret trade>>