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Confirming a solid start to 2017, DST Systems Inc. has come up with stellar first-quarter results. The company’s top and bottom-line results not only surpassed the respective Zacks Consensus Estimate but also improved year over year.
The company posted non-GAAP earnings (excluding discontinued operations and one-time items) of $1.66 per share, which surpassed the Zacks Consensus Estimate of $1.45. DST Systems’ non-GAAP earnings also registered a year-over-year increase of 28.3%, primarily driven by higher revenues, effective cost management and lower share count.
Quarter Details
Total revenue in the first quarter came in at $405.5 million, up 6.5% from the year-ago quarter. Excluding out-of-the-pocket reimbursements, consolidated operating revenues increased 5.1% year over year to $379.7 million, ahead of the Zacks Consensus Estimate of $373 million.
In first-quarter 2017, DST changed its reportable segment structure, which splits the previously reported Financial Services segment, into two new segments, Domestic Financial Services and International Financial Services. The Healthcare Services segment remains unchanged.
Domestic Financial Services operating revenues (excluding out-of-the-pocket reimbursements) were up 3.1% year over year and came in at $254 million. Benefits from businesses acquired from KRFS and BFDS in 2017 and increased revenues from organic growth and positive market movement at ALPS coupled with new client growth positively impacted the segment.
International Financial Services Segment went up 34.9% to $32.8 million, primarily due to synergies from IFDS U.K acquisition.
Healthcare Services operating revenues were up 3.4% on a year-over-year basis and came in at $107.7 million, primarily due to expansion in high-value services for medical and pharmacy businesses, new medical claims, and organic growth.
Total cost and expenses were up 6.4% from the year-ago quarter to $326.4 million. Also, as a percentage of revenues, costs and expenses were up 100 basis points (bps) on a year-over-year basis to 85.9%.
Non-GAAP operating income increased 12.1% year over year and came in at $66.6 million. Operating margin was also up 110 bps on a year-over-year basis to 17.5%. The increase in operating income was primarily driven by cost-cutting measures within the Domestic Financial Services segment and growth in the Healthcare Services segment.
DST reported non-GAAP net income of $46.5 million compared with $38.7 million reported in the year-ago quarter.
The company exited the quarter with $260.4 million in cash and equivalents compared with $195.5 million in the previous quarter. Long-term debt (including current portion) was $730.7 million compared with $508.2 million in the previous quarter.
During the first quarter, DST Systems repurchased roughly 0.666 million shares worth $75 million. Furthermore, during April 2017, the company repurchased $75 million worth of its common stock which exhausted the existing share-repurchase plan.
Important Developments of 2017
DST Systems announced the completion of the acquisition of State Street's ownership interest in both Boston Financial Data Services, Inc. ("BFDS") and International Financial Data Services Limited (IFDS U.K.). According to Steve Hooley, Chairman and CEO of DST, “We are confident that the single-operator model for these businesses will allow us to significantly enhance our clients' experience and improve the execution of our long-term growth strategy."
Our Take
DST Systems reported encouraging first-quarter results, wherein earnings and revenues both surpassed the Zacks Consensus Estimate. Moreover, both revenues and earnings grew year over year.
We are still of the opinion that DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are the other encouraging factors.
However, persistent decline in registered accounts, ongoing consolidation in the U.S. financial services market and stiff competition from International Business Machines Corporation (IBM - Free Report) and Fiserv Inc. might put its fundamentals under pressure. Moreover, a high debt burden remains a major concern for the company.
The stock price underperformed the Zacks categorized Computer-Software industry over the past one year. While the industry gained 28.5%, the stock returned only 0.3%.
Currently, DST Systems carries a Zacks Rank #1 (Strong Buy). Another stock worth considering in the Computer-Software industry is Micron Technology, Inc. (MU - Free Report) , which sports the same Zacks Rank. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron has an expected long-term EPS growth rate of 10%.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>
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DST Systems' (DST) Q1 Earnings & Revenues Beat Estimate
Confirming a solid start to 2017, DST Systems Inc. has come up with stellar first-quarter results. The company’s top and bottom-line results not only surpassed the respective Zacks Consensus Estimate but also improved year over year.
The company posted non-GAAP earnings (excluding discontinued operations and one-time items) of $1.66 per share, which surpassed the Zacks Consensus Estimate of $1.45. DST Systems’ non-GAAP earnings also registered a year-over-year increase of 28.3%, primarily driven by higher revenues, effective cost management and lower share count.
Quarter Details
Total revenue in the first quarter came in at $405.5 million, up 6.5% from the year-ago quarter. Excluding out-of-the-pocket reimbursements, consolidated operating revenues increased 5.1% year over year to $379.7 million, ahead of the Zacks Consensus Estimate of $373 million.
In first-quarter 2017, DST changed its reportable segment structure, which splits the previously reported Financial Services segment, into two new segments, Domestic Financial Services and International Financial Services. The Healthcare Services segment remains unchanged.
Domestic Financial Services operating revenues (excluding out-of-the-pocket reimbursements) were up 3.1% year over year and came in at $254 million. Benefits from businesses acquired from KRFS and BFDS in 2017 and increased revenues from organic growth and positive market movement at ALPS coupled with new client growth positively impacted the segment.
International Financial Services Segment went up 34.9% to $32.8 million, primarily due to synergies from IFDS U.K acquisition.
Healthcare Services operating revenues were up 3.4% on a year-over-year basis and came in at $107.7 million, primarily due to expansion in high-value services for medical and pharmacy businesses, new medical claims, and organic growth.
Total cost and expenses were up 6.4% from the year-ago quarter to $326.4 million. Also, as a percentage of revenues, costs and expenses were up 100 basis points (bps) on a year-over-year basis to 85.9%.
Non-GAAP operating income increased 12.1% year over year and came in at $66.6 million. Operating margin was also up 110 bps on a year-over-year basis to 17.5%. The increase in operating income was primarily driven by cost-cutting measures within the Domestic Financial Services segment and growth in the Healthcare Services segment.
DST reported non-GAAP net income of $46.5 million compared with $38.7 million reported in the year-ago quarter.
The company exited the quarter with $260.4 million in cash and equivalents compared with $195.5 million in the previous quarter. Long-term debt (including current portion) was $730.7 million compared with $508.2 million in the previous quarter.
During the first quarter, DST Systems repurchased roughly 0.666 million shares worth $75 million. Furthermore, during April 2017, the company repurchased $75 million worth of its common stock which exhausted the existing share-repurchase plan.
Important Developments of 2017
DST Systems announced the completion of the acquisition of State Street's ownership interest in both Boston Financial Data Services, Inc. ("BFDS") and International Financial Data Services Limited (IFDS U.K.). According to Steve Hooley, Chairman and CEO of DST, “We are confident that the single-operator model for these businesses will allow us to significantly enhance our clients' experience and improve the execution of our long-term growth strategy."
Our Take
DST Systems reported encouraging first-quarter results, wherein earnings and revenues both surpassed the Zacks Consensus Estimate. Moreover, both revenues and earnings grew year over year.
We are still of the opinion that DST Systems’ business volume and massive scale of operation in Financial Services will attract new customers. Moreover, we expect steady contributions from acquisitions to support revenue growth. Continued share buybacks and dividend payments are the other encouraging factors.
However, persistent decline in registered accounts, ongoing consolidation in the U.S. financial services market and stiff competition from International Business Machines Corporation (IBM - Free Report) and Fiserv Inc. might put its fundamentals under pressure. Moreover, a high debt burden remains a major concern for the company.
The stock price underperformed the Zacks categorized Computer-Software industry over the past one year. While the industry gained 28.5%, the stock returned only 0.3%.
Currently, DST Systems carries a Zacks Rank #1 (Strong Buy). Another stock worth considering in the Computer-Software industry is Micron Technology, Inc. (MU - Free Report) , which sports the same Zacks Rank. You can see the complete list of today’s Zacks #1 Rank stocks here.
Micron has an expected long-term EPS growth rate of 10%.
Zacks' Hidden Trades
While we share many recommendations and ideas with the public, certain moves are hidden from everyone but selected members of our portfolio services. Would you like to peek behind the curtain today and view them?
Starting now, for the next month, I invite you to follow all Zacks' private buys and sells in real time from value to momentum...from stocks under $10 to ETF to option movers...from insider trades to companies that are about to report positive earnings surprises (we've called them with 80%+ accuracy). You can even look inside portfolios so exclusive that they are normally closed to new investors. Click here for Zacks' secret trade>>