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Why Is MSCI (MSCI) Down 3% Since Last Earnings Report?
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A month has gone by since the last earnings report for MSCI (MSCI - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MSCI 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 catalysts.
MSCI Inc.’s second-quarter 2020 adjusted earnings of $1.77 per share beat the Zacks Consensus Estimate by 4.1% and also increased 14.9% from the year-ago quarter.
Operating revenues improved 6.2% year over year to $409.6 million but lagged the consensus mark by 0.6%. This year-over-year growth was driven by a 7.2% and 0.4% rise in recurring subscriptions (75.7% of revenues) and asset-based fees (21.5% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) surged 34.4% year over year to $11.7 million.
At the end of the quarter, average assets under management were $825.4 billion in ETFs linked to MSCI indexes. Total retention rate was 93.5% in the quarter under review.
Index Revenue Details
In the second quarter, Index operating revenues (59.3% of operating revenues) improved 7.7% year over year to $242.9 million, primarily driven by growth in recurring subscriptions (up 10%) and asset-based fees (up 0.4%).
Higher recurring subscriptions were driven by growth in core products as well as factor and ESG/Climate index products.
Index net new recurring subscription sales decreased 19.3%.
Analytics Revenue Details
Analytics operating revenues (31.1% of operating revenues) improved 3.1% year over year to $127.6 million. While recurring subscription revenues increased 3.7%, non-recurring revenues were down 30.7%.
Analytics net new recurring subscription sales plunged 32.6%.
All Other Segment Revenue Details
All Other operating revenues (9.6% of operating revenues) rose 7.8% from the year-ago quarter to $39.1 million, primarily driven by recurring subscriptions (up 8.5%).
All Other organic operating revenue growth was 9.2% with ESG organic operating revenues increasing 23%. However, Real Estate organic operating revenues declined 10.7% in the reported quarter.
All Other net new recurring subscription sales surged 65.3% year over year.
Operating Details
Adjusted EBITDA grew 11.8% year over year to $236.7 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 290 basis points (bps) on a year-over-year basis to 57.8%.
Total operating expenses increased 0.7% on a year-over-year basis at $194.4 million, primarily due to higher compensation and benefit costs.
Research & development and selling & marketing expenses fell 5.1% and 0.1% respectively. However, general & administrative expenses rose 7.3% year over year.
Operating income improved 11.9% from the year-ago quarter to $215.2 million. Operating margin expanded 260 bps to 52.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents as of Jun 30, 2020 were $1.38 billion compared with $1.07billion as of Mar 31, 2020.
Total debt was $3.4 billion as of Jun 30 compared with $3.2 billion as of Mar 31. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.7, higher than management’s target range of 3-3.5.
Net cash provided by operating activities was $262.6 million in the second quarter, up 38.6% year over year. Free cash flow was $251.1 million, up 41.8% year over year.
In second quarter, MSCI repurchased 0.1 million shares for a total value of $31.1 million. Notably, $1.1 billion is outstanding under the share repurchase authorization as of Jul 28, 2020.
MSCI also paid out dividends worth $56.9 million in the second quarter.
Guidance
For 2020, MSCI still expects total operating expenses of $790-$840 million. Adjusted EBITDA expenses are expected between $700 million and $750 million.
Capex is expected to be $50-$60 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be in the upper end of the previously provided guidance ranges of $600-$650 million and $540-$600 million, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, MSCI has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is MSCI (MSCI) Down 3% Since Last Earnings Report?
A month has gone by since the last earnings report for MSCI (MSCI - Free Report) . Shares have lost about 3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is MSCI 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 catalysts.
MSCI Q2 Earnings Beat, Recurring Subscription Revenues Rise
MSCI Inc.’s second-quarter 2020 adjusted earnings of $1.77 per share beat the Zacks Consensus Estimate by 4.1% and also increased 14.9% from the year-ago quarter.
Operating revenues improved 6.2% year over year to $409.6 million but lagged the consensus mark by 0.6%. This year-over-year growth was driven by a 7.2% and 0.4% rise in recurring subscriptions (75.7% of revenues) and asset-based fees (21.5% of revenues), respectively.
Non-recurring revenues (2.8% of revenues) surged 34.4% year over year to $11.7 million.
At the end of the quarter, average assets under management were $825.4 billion in ETFs linked to MSCI indexes. Total retention rate was 93.5% in the quarter under review.
Index Revenue Details
In the second quarter, Index operating revenues (59.3% of operating revenues) improved 7.7% year over year to $242.9 million, primarily driven by growth in recurring subscriptions (up 10%) and asset-based fees (up 0.4%).
Higher recurring subscriptions were driven by growth in core products as well as factor and ESG/Climate index products.
Index net new recurring subscription sales decreased 19.3%.
Analytics Revenue Details
Analytics operating revenues (31.1% of operating revenues) improved 3.1% year over year to $127.6 million. While recurring subscription revenues increased 3.7%, non-recurring revenues were down 30.7%.
Analytics net new recurring subscription sales plunged 32.6%.
All Other Segment Revenue Details
All Other operating revenues (9.6% of operating revenues) rose 7.8% from the year-ago quarter to $39.1 million, primarily driven by recurring subscriptions (up 8.5%).
All Other organic operating revenue growth was 9.2% with ESG organic operating revenues increasing 23%. However, Real Estate organic operating revenues declined 10.7% in the reported quarter.
All Other net new recurring subscription sales surged 65.3% year over year.
Operating Details
Adjusted EBITDA grew 11.8% year over year to $236.7 million in the reported quarter. Moreover, adjusted EBITDA margin expanded 290 basis points (bps) on a year-over-year basis to 57.8%.
Total operating expenses increased 0.7% on a year-over-year basis at $194.4 million, primarily due to higher compensation and benefit costs.
Research & development and selling & marketing expenses fell 5.1% and 0.1% respectively. However, general & administrative expenses rose 7.3% year over year.
Operating income improved 11.9% from the year-ago quarter to $215.2 million. Operating margin expanded 260 bps to 52.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents as of Jun 30, 2020 were $1.38 billion compared with $1.07billion as of Mar 31, 2020.
Total debt was $3.4 billion as of Jun 30 compared with $3.2 billion as of Mar 31. Total debt to adjusted EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.7, higher than management’s target range of 3-3.5.
Net cash provided by operating activities was $262.6 million in the second quarter, up 38.6% year over year. Free cash flow was $251.1 million, up 41.8% year over year.
In second quarter, MSCI repurchased 0.1 million shares for a total value of $31.1 million. Notably, $1.1 billion is outstanding under the share repurchase authorization as of Jul 28, 2020.
MSCI also paid out dividends worth $56.9 million in the second quarter.
Guidance
For 2020, MSCI still expects total operating expenses of $790-$840 million. Adjusted EBITDA expenses are expected between $700 million and $750 million.
Capex is expected to be $50-$60 million.
Moreover, net cash provided by operating activities and free cash flow are expected to be in the upper end of the previously provided guidance ranges of $600-$650 million and $540-$600 million, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended upward during the past month.
VGM Scores
At this time, MSCI has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.