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Verisk (VRSK) Misses Q1 Earnings on Muted Industry Growth
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Data analytics services provider Verisk Analytics, Inc. (VRSK - Free Report) reported sedate first-quarter 2017 results on muted industry growth and related headwinds. Net income from continuing operations decreased to $108.8 million from $109.7 million in the year-earlier quarter on higher operating expenses. On a per share basis, net income from continuing operations remained flat at 64 cents owing to lower number of outstanding shares.
Adjusted earnings from continuing operations declined marginally to 74 cents per share from 75 cents in the year-ago quarter and missed the Zacks Consensus Estimate of 78 cents.
Total revenue for the reported quarter improved to $502.6 million from $492.7 million in the prior-year period due to modest organic growth at constant currency basis. However, revenues missed the Zacks Consensus Estimate of $512 million. EBITDA (earnings before interest, tax, depreciation and amortization) from continuing operations for the quarter decreased 1.1% year over year to $245.7 million.
Segmental Performance
Decision Analytics segment’s revenues from continuing operations remained almost flat at $313.2 million and accounted for 62.3% of total revenue. Energy and Specialized Markets category revenues declined 5.9% year over year to $106.3 million, owing to end-market headwinds and lower revenues in environmental health and safety solutions. Insurance category revenues increased 4.1% to $178.6 million on solid underwriting solutions growth. Financial Services category revenues were marginally down to $28.3 million, as growth in media effectiveness and core banking solutions were offset by completed contracts.
Risk Assessment segment’s revenues grew 5.4% to $189.4 million, accounting for 37.7% of total revenue. Property-specific rating and underwriting information revenues improved 3.5% to $43.8 million, driven by an increase in underwriting solutions subscription revenues. Industry-standard insurance programs revenues were up 5.9% to $145.6 million, primarily attributable to growth in new solutions.
Acquisitions
During the quarter, Verisk acquired Bangalore-based data solutions company, Fintellix. Founded in 2006, Fintellix specializes in the development of data management platforms and regulatory reporting solutions for financial institutions. The company offers analytics, risk and compliance solutions for the banking sector.
Per the agreement, Fintellix will become part of Verisk’s Argus business. Fintellix’s advanced data management platform, along with its regulatory reporting expertise, will be a valuable addition to both Argus and Verisk. The collaboration will help the company offer better services and highly advanced solutions to its customers. In addition, this deal will also enable Verisk expand its foothold across India as well.
Verisk also purchased Arium, a liability risk modeling and decision support firm, for an undisclosed amount. Formed in 1998, Arium or Architects for Risk Identification, Understanding, and Management specializes in developing risk models, mainly for the reinsurance industry. The company uses a unique methodology based on dependency theory. Its casualty analytics platform enables other companies to run historical and emerging scenarios and build their own scenarios across all casualty lines. Incorporating Arium’s methodologies will enable Verisk’s clients to comprehensively manage risks across their portfolios in the casualty market. We expect the acquisitions to be accretive for the company in the near future.
Verisk Analytics, Inc. Price, Consensus and EPS Surprise
At the end of the quarter, Verisk had about $155 million in cash and cash equivalents with long-term debt of $2,281 million. Net cash generated from operating activities in the reported quarter was $317.9 million compared with $303.9 million in the prior-year period.
Verisk repurchased 1.3 million shares during the quarter at an average price of $81.24 per share for $104 million. At quarter end, the company had $532 million worth of shares remaining under its share repurchase authorization.
Moving Forward
Verisk continues to deliver outstanding data analytics solutions to its 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.
CBIZ topped estimates twice in the trailing four quarters with an average earnings surprise of 18.4%.
S&P Global has a long-term earnings growth expectation of 12.3%. It has a positive earnings history, beating estimates in each of the trailing four quarters.
Huron has a long-term earnings growth expectation of 13.5%. It has a positive earnings history, beating estimates thrice in the trailing four quarters.
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Verisk (VRSK) Misses Q1 Earnings on Muted Industry Growth
Data analytics services provider Verisk Analytics, Inc. (VRSK - Free Report) reported sedate first-quarter 2017 results on muted industry growth and related headwinds. Net income from continuing operations decreased to $108.8 million from $109.7 million in the year-earlier quarter on higher operating expenses. On a per share basis, net income from continuing operations remained flat at 64 cents owing to lower number of outstanding shares.
Adjusted earnings from continuing operations declined marginally to 74 cents per share from 75 cents in the year-ago quarter and missed the Zacks Consensus Estimate of 78 cents.
Total revenue for the reported quarter improved to $502.6 million from $492.7 million in the prior-year period due to modest organic growth at constant currency basis. However, revenues missed the Zacks Consensus Estimate of $512 million. EBITDA (earnings before interest, tax, depreciation and amortization) from continuing operations for the quarter decreased 1.1% year over year to $245.7 million.
Segmental Performance
Decision Analytics segment’s revenues from continuing operations remained almost flat at $313.2 million and accounted for 62.3% of total revenue. Energy and Specialized Markets category revenues declined 5.9% year over year to $106.3 million, owing to end-market headwinds and lower revenues in environmental health and safety solutions. Insurance category revenues increased 4.1% to $178.6 million on solid underwriting solutions growth. Financial Services category revenues were marginally down to $28.3 million, as growth in media effectiveness and core banking solutions were offset by completed contracts.
Risk Assessment segment’s revenues grew 5.4% to $189.4 million, accounting for 37.7% of total revenue. Property-specific rating and underwriting information revenues improved 3.5% to $43.8 million, driven by an increase in underwriting solutions subscription revenues. Industry-standard insurance programs revenues were up 5.9% to $145.6 million, primarily attributable to growth in new solutions.
Acquisitions
During the quarter, Verisk acquired Bangalore-based data solutions company, Fintellix. Founded in 2006, Fintellix specializes in the development of data management platforms and regulatory reporting solutions for financial institutions. The company offers analytics, risk and compliance solutions for the banking sector.
Per the agreement, Fintellix will become part of Verisk’s Argus business. Fintellix’s advanced data management platform, along with its regulatory reporting expertise, will be a valuable addition to both Argus and Verisk. The collaboration will help the company offer better services and highly advanced solutions to its customers. In addition, this deal will also enable Verisk expand its foothold across India as well.
Verisk also purchased Arium, a liability risk modeling and decision support firm, for an undisclosed amount. Formed in 1998, Arium or Architects for Risk Identification, Understanding, and Management specializes in developing risk models, mainly for the reinsurance industry. The company uses a unique methodology based on dependency theory. Its casualty analytics platform enables other companies to run historical and emerging scenarios and build their own scenarios across all casualty lines. Incorporating Arium’s methodologies will enable Verisk’s clients to comprehensively manage risks across their portfolios in the casualty market. We expect the acquisitions to be accretive for the company in the near future.
Verisk Analytics, Inc. Price, Consensus and EPS Surprise
Verisk Analytics, Inc. Price, Consensus and EPS Surprise | Verisk Analytics, Inc. Quote
Balance Sheet and Cash Flow
At the end of the quarter, Verisk had about $155 million in cash and cash equivalents with long-term debt of $2,281 million. Net cash generated from operating activities in the reported quarter was $317.9 million compared with $303.9 million in the prior-year period.
Verisk repurchased 1.3 million shares during the quarter at an average price of $81.24 per share for $104 million. At quarter end, the company had $532 million worth of shares remaining under its share repurchase authorization.
Moving Forward
Verisk continues to deliver outstanding data analytics solutions to its 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.
Verisk currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the industry include CBIZ, Inc. (CBZ - Free Report) , S&P Global, Inc. (SPGI - Free Report) and Huron Consulting Group Inc. (HURN - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
CBIZ topped estimates twice in the trailing four quarters with an average earnings surprise of 18.4%.
S&P Global has a long-term earnings growth expectation of 12.3%. It has a positive earnings history, beating estimates in each of the trailing four quarters.
Huron has a long-term earnings growth expectation of 13.5%. It has a positive earnings history, beating estimates thrice in the trailing four quarters.
Will You Make a Fortune on the Shift to Electric Cars?
Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.
With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.
It's not the one you think.
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