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Verisk (VRSK) Surpasses Q4 Earnings & Revenue Estimates

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Data analytics services provider Verisk Analytics, Inc. (VRSK - Free Report) reported strong fourth-quarter 2017 results with healthy year-over-year increase in revenues and earnings. Net income from continuing operations improved to $204.6 million from $107.5 million in the year-earlier quarter on top-line growth. On a per share basis, net income from continuing operations increased to $1.22 from 63 cents in the year-ago quarter. For full-year 2017, GAAP earnings from continuing operations were $555.1 million or $3.29 per share compared with $451.5 million or $2.64 per share in 2016.

Adjusted earnings from continuing operations were $225.4 million or $1.34 per share compared with $135.4 million or 80 cents per share in the prior-year period. Excluding the benefit from the tax reform, adjusted earnings for the quarter were 81 cents per share, which beat the Zacks Consensus Estimate by 3 cents.

Total revenues for the reported quarter improved 12.7% to $570.3 million due to modest organic growth across all businesses. Revenues exceeded the Zacks Consensus Estimate of $557 million. For 2017, revenues were $2,145.2 million compared with $1,995.2 million in 2016. Adjusted EBITDA (earnings before interest, tax, depreciation and amortization) from continuing operations for the quarter improved 6.9% year over year to $275.7 million.

Verisk Analytics, Inc. Price, Consensus and EPS Surprise

 

Verisk Analytics, Inc. Price, Consensus and EPS Surprise | Verisk Analytics, Inc. Quote

Segmental Performance

Decision Analytics segment’s revenues increased 16% year over year to $375.1 million and accounted for 65.8% of total revenues. Revenues from Energy and Specialized Markets category increased 6.3% to $116.6 million as end markets of energy business improved and accretive acquisitions contributed positively. Insurance category’s revenues increased 18.5% to $211.2 million driven by accretive acquisitions and solid performance by underwriting solutions, catastrophe modeling solutions and claims analytics. Financial Services category’s revenues were up to $47.3 million from $35.5 million in the prior-year period due to strong growth in analytical products and media effectiveness solutions and favorable acquisitions.

Risk Assessment segment’s revenues grew 6.9% to $195.2 million, accounting for 34.2% of total revenues while that from property-specific rating and underwriting information improved 3.5% to $44.2 million, driven by higher subscription revenues. Industry-standard insurance programs revenues were up 7.9% to $151 million, primarily attributable to growth in new solutions and accretive acquisitions.

Acquisition

During the quarter, Verisk acquired PowerAdvocate for $200 million in order to augment its presence in the energy sector. PowerAdvocate offers key insights into customer’s cost-saving opportunities by analyzing spend and cost data obtained from millions of transactions across thousands of services, materials and equipment categories in the energy industry. With its wide range of proprietary data, this enables companies to bring transparency in the market and ensure that capital is utilized efficiently.

The deal will add to Verisk’s existing pool of customers, giving it greater access to the global markets. Verisk with PowerAdvocate’s proprietary data set, encompassing $2.7 trillion of spending data and machine-learned methods, will provide customers with unique insight to increase profitability. The company’s revenues are likely to increase significantly as a result of this acquisition, providing greater market strength.

Balance Sheet and Cash Flow

At year-end 2017, Verisk had about $142.3 million in cash and cash equivalents with long-term debt of $2,284.4 million compared with respective tallies of $135.1 million and $2,280.2 million in the prior-year period. Net cash flow from operating activities in 2017 was $743.5 million compared with $577.5 million in 2016. Free cash flow from continuing operations for 2017 increased 36.5% year over year to $560 million.

Verisk repurchased 3.4 million shares in 2017 for $270 million. At year-end 2017, the company had $366 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 deleveraging objectives and helps it invest on behalf of its shareholders.

Verisk carries a Zacks Rank #3 (Hold). Better-ranked stocks in the industry include TransUnion (TRU - Free Report) , S&P Global, Inc. (SPGI - Free Report) and The Dun & Bradstreet Corporation (DNB - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

TransUnion has a long-term earnings growth expectation of 10%. It topped estimates in each of the trailing four quarters with an average earnings surprise of 5.2%.

S&P Global has a long-term earnings growth expectation of 14.5%. It has a positive earnings history, beating estimates in each of the trailing four quarters with an average earnings surprise of 12.8%.

Dun & Bradstreet has a long-term earnings growth expectation of 6%. It has beaten earnings estimates in each of the trailing four quarters with an average positive surprise of 11.8%.

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