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Verisk (VRSK) Misses Earnings and Revenue Estimates in Q2

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Verisk Analytics, Inc. (VRSK - Free Report) reported second-quarter adjusted earnings per share of 73 cents, compared with 72 cents in the year-ago quarter. Adjusted earnings missed the Zacks Consensus Estimate of 76 cents. The increase in earnings from the prior year quarter was attributed to solid operations, both organic and inorganic, and lower interest expense, partially offset by increase in depreciation and amortization expense.

Net income from continuing operations was $106.8 million or 62 cents per share versus $158.9 million or 95 cents per share in the prior-year quarter. The decrease in earnings, despite higher revenues, was due to one-time costs related to the acquisition of Wood Mackenzie partly offset by hedge gains.

Total revenues in second-quarter 2016 increased to $498.3 million from $428.6 million in the prior-year period due to solid organic and inorganic growth. Despite year-over-year increase, revenues missed the Zacks Consensus Estimate of $503 million. Adjusted EBITDA from continuing operations was $245.2 million in the reported quarter versus $ 217.9 million in the prior-year quarter.

Segment Performance

Decision Analytics segment revenues grew 23.5% to $317.2 million from $256.9 million a year ago. Revenues from this segment accounted for 63.7% of total revenues. Energy and specialized markets category revenues were up 70.4% to $111.1 million. Insurance category revenues increased 6.2% to $175.5 million, while financial services category revenues increased 15.9% to $30.6 million, driven by solid demand for both core and newer solutions.

Risk Assessment segment revenues grew 5.5% to $181.1 million, accounting for 36.3% of total revenues. Property-specific rating and underwriting information revenues grew 3.8% to $42.5 million, driven by an increase in commercial underwriting solutions subscription revenues. Industry-standard insurance programs revenues were up 6% to $138.6 million, primarily attributable to growth in new solutions.

Balance Sheet and Cash Flow

At quarter end, Verisk had about $196.4 million in cash and cash equivalents. The company repaid $705 million of debt in the quarter, bringing its long-term debt tally to $2,273 million at quarter end. For the first half of the year, free cash flow was $305.5 million.

At quarter end, the company had $353 million remaining under its share repurchase authorization.

VERISK ANALYTIC Price, Consensus and EPS Surprise

Verisk continues to deliver outstanding data analytics solutions to customers across its core verticals of insurance, natural resources, and financial services. The company’s ability to generate strong cash enables it to meet its deleveraging objectives and helps it invest on behalf of its shareholders. However, the company is focused on inorganic growth due to which it has to incur one-time expenses to ensure long term gains.

Verisk currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include CRA International Inc. (CRAI - Free Report) , Navigant Consulting Inc. (NCI - Free Report) and CoreLogic, Inc. . CRA International and CoreLogic carry a Zacks Rank #2 (Buy), whereas Navigant sports a Zacks Rank #1 (Strong Buy). 

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