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Broadridge (BR) Q1 Earnings Beat Estimates, Revenues Miss
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Shares of Broadridge Financial Solutions Inc. (BR - Free Report) advanced more than 3%, yesterday, after the company reported better-than-expected first-quarter fiscal 2018 earnings. Moreover, both the top and bottom line increased year over year.
The company posted adjusted earnings per share of 54 cents per share (excluding acquisition and amortization related expenses), surpassing the Zacks Consensus Estimate of 41 cents. Also, adjusted earnings increased 50% on a year-over-year basis.
In the last one year, Broadridge’s share price increased 49%, outperforming the Zacks industry, which gained only 14.8%.
Quarter Details
Broadridge’s first-quarter revenues of $925 million increased 3% year over year. However, it lagged the Zacks Consensus Estimate of $928 billion. Better-than-expected revenues from closed sale were a catalyst.
Recurring fee revenues increased 6% during the quarter that included contribution from organic growth, Net New Business, internal growth and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $23 million, reflecting an increase of 6% on a year-over-year basis. Event-driven fee revenues increased 58% to $59 million during the quarter, primarily due to higher proxy contest activity and higher mutual fund proxy activity. Distribution revenues during the quarter decreased 6%, primarily due to foreign currency fluctuations.
Revenues from the Investor Communication Solutions segment (79% of total revenues) increased 1% from the year-ago quarter to $733 million. The improvement was attributable to higher recurring revenues from net new business, closed sales, higher event-driven fee revenues and internal growth.
The Global Technology and Operations segment (21% of total revenues) revenues came in at $208 million, reflecting an increase of 11% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales, internal growth and recent acquisition.
Broadridge’s adjusted operating income margin expanded from 9.1% to 11.5%, primarily due to the higher recurring fee revenues and event-driven fee revenues. Selling, general and administrative expenses as a percentage of revenues contracted from 12.4% to 12.3% on a year-over-year basis. The company’s adjusted net income of $64 million or 54 cents was up from $44 million or 36 cents in the year-ago period.
The company exited the quarter with cash and cash equivalents of $288.8 million compared with $271.1 million in the previous quarter. Long-term debt on the balance sheet totaled $1.292.4 billion.
Cash flow used in operating activities during the quarter was $93.3 million. Free cash flow came in at (129.3) million.
The company did not repurchase any shares during the quarter but declared a dividend of 36.5 cents during this period.
Fiscal 2018 Guidance
Broadridge reiterated 2018 outlook. The company projects revenue growth in the range of 2-3%, while recurring revenue growth is expected in the range of 4-6%. The company anticipates recurring revenues from closed sales to be a key growth driver and range within $170 million to $210 million. Adjusted operating income margin is expected to be approximately 16%. Adjusted earnings are expected to increase in the range of 15-19%. Management expects free cash flow in the range of $400-$450 million.
Recent Activity
The company recently announced the acquisition of Summit Financial Disclosure, LLC (“Summit”). Summit is a full service financial document management solutions provider. We remain encouraged by its buyout spree, with the help of which the company is expanding its product portfolio and customer reach.
Our Take
Broadridge reported mixed first-quarter results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Year-over-year comparisons on both the counts were favorable backed by higher recurring revenues, internal growth, contribution from Net New Business, higher distribution revenues and acquisition-related synergies.
We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture (ACN - Free Report) will be beneficial in the long run.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
Currently, Broadridge carries a Zacks Rank #2 (Buy).
Micron Technology has an expected long-term EPS growth rate of 10%.
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It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
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Broadridge (BR) Q1 Earnings Beat Estimates, Revenues Miss
Shares of Broadridge Financial Solutions Inc. (BR - Free Report) advanced more than 3%, yesterday, after the company reported better-than-expected first-quarter fiscal 2018 earnings. Moreover, both the top and bottom line increased year over year.
The company posted adjusted earnings per share of 54 cents per share (excluding acquisition and amortization related expenses), surpassing the Zacks Consensus Estimate of 41 cents. Also, adjusted earnings increased 50% on a year-over-year basis.
In the last one year, Broadridge’s share price increased 49%, outperforming the Zacks industry, which gained only 14.8%.
Quarter Details
Broadridge’s first-quarter revenues of $925 million increased 3% year over year. However, it lagged the Zacks Consensus Estimate of $928 billion. Better-than-expected revenues from closed sale were a catalyst.
Recurring fee revenues increased 6% during the quarter that included contribution from organic growth, Net New Business, internal growth and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $23 million, reflecting an increase of 6% on a year-over-year basis. Event-driven fee revenues increased 58% to $59 million during the quarter, primarily due to higher proxy contest activity and higher mutual fund proxy activity. Distribution revenues during the quarter decreased 6%, primarily due to foreign currency fluctuations.
Revenues from the Investor Communication Solutions segment (79% of total revenues) increased 1% from the year-ago quarter to $733 million. The improvement was attributable to higher recurring revenues from net new business, closed sales, higher event-driven fee revenues and internal growth.
The Global Technology and Operations segment (21% of total revenues) revenues came in at $208 million, reflecting an increase of 11% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales, internal growth and recent acquisition.
Broadridge’s adjusted operating income margin expanded from 9.1% to 11.5%, primarily due to the higher recurring fee revenues and event-driven fee revenues. Selling, general and administrative expenses as a percentage of revenues contracted from 12.4% to 12.3% on a year-over-year basis. The company’s adjusted net income of $64 million or 54 cents was up from $44 million or 36 cents in the year-ago period.
The company exited the quarter with cash and cash equivalents of $288.8 million compared with $271.1 million in the previous quarter. Long-term debt on the balance sheet totaled $1.292.4 billion.
Cash flow used in operating activities during the quarter was $93.3 million. Free cash flow came in at (129.3) million.
The company did not repurchase any shares during the quarter but declared a dividend of 36.5 cents during this period.
Fiscal 2018 Guidance
Broadridge reiterated 2018 outlook. The company projects revenue growth in the range of 2-3%, while recurring revenue growth is expected in the range of 4-6%. The company anticipates recurring revenues from closed sales to be a key growth driver and range within $170 million to $210 million. Adjusted operating income margin is expected to be approximately 16%. Adjusted earnings are expected to increase in the range of 15-19%. Management expects free cash flow in the range of $400-$450 million.
Recent Activity
The company recently announced the acquisition of Summit Financial Disclosure, LLC (“Summit”). Summit is a full service financial document management solutions provider. We remain encouraged by its buyout spree, with the help of which the company is expanding its product portfolio and customer reach.
Our Take
Broadridge reported mixed first-quarter results, wherein the bottom line surpassed the Zacks Consensus Estimate but the top line missed the same. Year-over-year comparisons on both the counts were favorable backed by higher recurring revenues, internal growth, contribution from Net New Business, higher distribution revenues and acquisition-related synergies.
We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture (ACN - Free Report) will be beneficial in the long run.
However, competition from DST Systems Inc. and pricing pressure remain headwinds.
Currently, Broadridge carries a Zacks Rank #2 (Buy).
Another top-ranked stock worth considering in the broader technology sector is Micron Technology, Inc. (MU - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron Technology has an expected long-term EPS growth rate of 10%.
Today's Stocks from Zacks' Hottest Strategies
It's hard to believe, even for us at Zacks. But while the market gained +18.8% from 2016 - Q1 2017, our top stock-picking screens have returned +157.0%, +128.0%, +97.8%, +94.7%, and +90.2% respectively.
And this outperformance has not just been a recent phenomenon. Over the years it has been remarkably consistent. From 2000 - Q1 2017, the composite yearly average gain for these strategies has beaten the market more than 11X over. Maybe even more remarkable is the fact that we're willing to share their latest stocks with you without cost or obligation.
See Them Free>>