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Why Is MSCI (MSCI) Up 11.6% Since Last Earnings Report?
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It has been about a month since the last earnings report for MSCI (MSCI - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MSCI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MSCI third-quarter 2023 adjusted earnings of $3.45 per share beat the Zacks Consensus Estimate by 3.6% and increased 21.1% year over year.
Revenues increased 11.6% year over year to $625.4 million but lagged the consensus mark by 0.55%. Organic revenues increased 10.9% year over year.
Recurring subscriptions of $465 million increased 10.7% year over year and accounted for 74.3% of revenues. Our model estimate for recurring subscriptions was pegged at $476.8 million.
Asset-based fees of $141.1 million increased 12.3% year over year and contributed 22.6% of revenues. Our model estimate for asset-based fees was pegged at $128.4 million.
Non-recurring revenues of $19.4 million increased 30.9% year over year and contributed 3.1% of revenues. Our model estimate for non-recurring revenues was pegged at $19.3 million.
At the end of the reported quarter, average assets under management were $1.32 trillion in ETFs linked to MSCI indexes.
The total retention rate was 95.4% in the quarter under review, down from 96.4% reported in the year-ago quarter.
Quarter Details
In the third quarter, Index revenues of $362.1 million beat the Zacks Consensus Estimate by 0.74% and increased 12.4% year over year. The upside can be attributed to higher recurring subscription revenues (up 11.3% year over year).
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap-weighted Index products.
Analytics operating revenues of $154.3 million lagged the consensus mark by 0.59% but increased 6.5% year over year. The year-over-year growth was driven by higher recurring subscription revenues from Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues of $73 million lagged the consensus mark by 1.71% but increased 26.8% year over year, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products.
Other revenues, which primarily comprise the Real Estate operating segment, were $36 million, up 0.3% year over year. The figure lagged the consensus mark by 7.08%.
Adjusted EBITDA increased 13.3% year over year to $386.2 million in the reported quarter. Adjusted EBITDA margin expanded 100 basis points (bps) on a year-over-year basis to 61.8%.
Total operating expenses increased 8.4% on a year-over-year basis to $272.1 million.
Adjusted EBITDA expenses were $239.2 million, up 8.9%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount.
Operating income improved 14.1% year over year to $353.3 million. The operating margin expanded 130 bps on a year-over-year basis to 56.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2023, were $928.6 million compared with $792.3 million as of Jun 30, 2023.
Total debt was $4.5 billion as of Sep 30, unchanged sequentially. The total debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.1 times, within the management’s target range of 3-3.5 times.
Free cash flow was $270.2 million, down 11.4% year over year.
The company repurchased 38,263 shares for $17.9 million in the reported quarter. MSCI had $0.8 billion outstanding under its share-repurchase authorization as of Oct 30.
It paid out dividends worth $109.2 million in the third quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.135-$1.165 billion.
Adjusted EBITDA expenses are expected between $ 1 billion and $1.020 billion.
Interest expenses are expected to be $187 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, MSCI has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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) Up 11.6% Since Last Earnings Report?
It has been about a month since the last earnings report for MSCI (MSCI - Free Report) . Shares have added about 11.6% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MSCI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
MSCI Q3 Earnings Beat, Recurring Subscriptions Rise Y/Y
MSCI third-quarter 2023 adjusted earnings of $3.45 per share beat the Zacks Consensus Estimate by 3.6% and increased 21.1% year over year.
Revenues increased 11.6% year over year to $625.4 million but lagged the consensus mark by 0.55%. Organic revenues increased 10.9% year over year.
Recurring subscriptions of $465 million increased 10.7% year over year and accounted for 74.3% of revenues. Our model estimate for recurring subscriptions was pegged at $476.8 million.
Asset-based fees of $141.1 million increased 12.3% year over year and contributed 22.6% of revenues. Our model estimate for asset-based fees was pegged at $128.4 million.
Non-recurring revenues of $19.4 million increased 30.9% year over year and contributed 3.1% of revenues. Our model estimate for non-recurring revenues was pegged at $19.3 million.
At the end of the reported quarter, average assets under management were $1.32 trillion in ETFs linked to MSCI indexes.
The total retention rate was 95.4% in the quarter under review, down from 96.4% reported in the year-ago quarter.
Quarter Details
In the third quarter, Index revenues of $362.1 million beat the Zacks Consensus Estimate by 0.74% and increased 12.4% year over year. The upside can be attributed to higher recurring subscription revenues (up 11.3% year over year).
Growth in recurring subscription revenues was primarily driven by strong growth from market-cap-weighted Index products.
Analytics operating revenues of $154.3 million lagged the consensus mark by 0.59% but increased 6.5% year over year. The year-over-year growth was driven by higher recurring subscription revenues from Multi-Asset Class and Equity Analytics products.
ESG and Climate segment’s operating revenues of $73 million lagged the consensus mark by 1.71% but increased 26.8% year over year, primarily driven by strong growth from recurring subscriptions related to Ratings, Climate and Screening products.
Other revenues, which primarily comprise the Real Estate operating segment, were $36 million, up 0.3% year over year. The figure lagged the consensus mark by 7.08%.
Adjusted EBITDA increased 13.3% year over year to $386.2 million in the reported quarter. Adjusted EBITDA margin expanded 100 basis points (bps) on a year-over-year basis to 61.8%.
Total operating expenses increased 8.4% on a year-over-year basis to $272.1 million.
Adjusted EBITDA expenses were $239.2 million, up 8.9%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount.
Operating income improved 14.1% year over year to $353.3 million. The operating margin expanded 130 bps on a year-over-year basis to 56.5%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Sep 30, 2023, were $928.6 million compared with $792.3 million as of Jun 30, 2023.
Total debt was $4.5 billion as of Sep 30, unchanged sequentially. The total debt-to-adjusted-EBITDA ratio (based on trailing twelve-month-adjusted EBITDA) was 3.1 times, within the management’s target range of 3-3.5 times.
Free cash flow was $270.2 million, down 11.4% year over year.
The company repurchased 38,263 shares for $17.9 million in the reported quarter. MSCI had $0.8 billion outstanding under its share-repurchase authorization as of Oct 30.
It paid out dividends worth $109.2 million in the third quarter.
Guidance
For 2023, MSCI expects total operating expenses in the range of $1.135-$1.165 billion.
Adjusted EBITDA expenses are expected between $ 1 billion and $1.020 billion.
Interest expenses are expected to be $187 million.
Net cash provided by operating activities and free cash flow is expected to be $1.145-$1.195 billion and $1.060-$1.120 billion, respectively.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended downward during the past month.
VGM Scores
Currently, MSCI has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.