j2 Global, Inc. (JCOM - Free Report) is in a hot area of the market with cloud services and digital media. This Zacks Rank #1 (Strong Buy) is a rare mid-cap value stock with double digit earnings growth.
j2 Global is a mid-cap technology company with a market cap of $4.1 billion. It has two business segments: Cloud Services and Digital Media.
Cloud Services is its legacy business and offers Internet fax, virtual phone, hosted email, email marketing and online backup among other services.
The Digital Media end of the business offers technology, gaming, lifestyle and healthcare content through a range of digital properties including PCMag, IGN, Offers.com, Everyday Health and others.
It reaches 180 million people per month across its brands.
A Record Second Quarter
On Aug 9, j2 Global reported its second quarter results and beat the Zacks Consensus by 8 cents. Earnings were $1.50 versus the consensus of $1.42.
It was the second consecutive earnings beat in a row.
Revenue jumped 5.4% to a second quarter record of $287.9 million, up from $273.2 million in the second quarter of 2017.
Cloud was up 3.9% while Digital Media gained 7.1%.
One negative was that the company did see softness in advertising, especially in display and video advertising. This is a very competitive category with Google and Facebook as the main competitors.
Raised Full Year EPS Guidance
j2 Global reaffirmed its revenue outlook for 2018 of between $1.2 billion and $1.25 billion which was a positive given that advertising was soft. Clearly the company sees that situation as a one-time event.
It did raise earnings guidance, however, due to the continued review of the income tax benefits relating to the 2017 Tax Act.
The new range is between $6.16 and $6.46 from $5.95 and $6.25.
As a result, the analysts adjusted their earnings outlook accordingly.
3 estimates moved higher in the last 30 days pushing the Zacks Consensus up to $6.23 from $6.07. That's a gain of 10.5% versus 2017.
2019 is looking up as well. While the analysts are mixed, with one raising and 2 cutting estimates over the last month, analysts still see earnings growth of another 6.9%.
Another Dividend Increase
It's rare to find a mid-cap value stock that also pays a decent dividend.
j2 Global raised its dividend 2.4% for the next quarter to $0.4250 per share. That's the 28th consecutive quarterly dividend increase since it first offered the dividend in September 2011.
It's currently yielding 2.1%.
It has great cash flow. As of the end of the second quarter, it had $428 million in cash and cash equivalents. It spent $44 million in the second quarter on the dividend and acquisitions.
A Buying Opportunity?
Shares weakened after the earnings report and are down 3.3% over the last month.
However, they're still up 11.4% year-to-date.
And the shares are still cheap, with a forward P/E of just 14.5.
For investors looking for a value stock with growth potential, then j2 Global is one to keep on the short list.
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