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What's in Store for Verisk (VRSK) this Earnings Season?

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Business information services firm Verisk Analytics, Inc. (VRSK - Free Report) is scheduled to report second-quarter 2017 results after market close on Aug 1. In the last reported quarter, adjusted earnings missed the Zacks Consensus Estimate by 4 cents. Over the trailing four quarters, Verisk beat earnings estimates twice, delivering an average positive surprise of 1.71%.

Let’s see how things are shaping up for this announcement.

Key Factors in the Second Quarter

During the quarter, Verisk acquired MAKE, a leading research and advisory business specializing in wind power. Per the deal, MAKE became part of Verisk’s operating unit, Wood Mackenzie. This acquisition will enhance the company’s offerings to its existing clients and help it become the leading market analysis and advisory firm. The company expects this acquisition to be accretive in the quarter to be reported.

Also, Verisk’s business arm, ISO signed a strategic alliance with IDP, Inc., for expanding the ISO Preferred Data Partnership program. Under the Preferred Data Partnership program, ISO accumulates and refines raw policy data straight from insurers. The collected data is used to form reports that are submitted to the regulatory authorities across the U.S. The two companies would thereby be converting the accumulated native data into valuable information and provide regulatory as well as statistical reports to the regulatory authorities, on behalf of the insurers (for both special data calls and conventional reporting requisites). This will help boost the company’s revenues in the to-be-reported quarter.

However, a significant portion of the company’s revenues is generated from operations outside the U.S. With modest revenues coming from the U.K., Verisk is likely to be stifled by the renegotiated deals and restrictions imposed on trade with other European Union members. Brexit could further result in higher tariff and non-tariff barriers to trade between the U.K. and the European Union, lowering the productivity of the company. These undermine its long-term growth potential to some extent.

Verisk’s business model is centered on large troves of data. Consequently, the company is susceptible to operational risks related to security breaches in its facilities, computer networks and databases, resulting in a loss of its credibility and/or customers. Data theft and misuse by third-party contractors could also lead to loss of businesses and jeopardize the fundamental existence of the company.

Earnings Whispers

Despite the inherent strengths, our proven model does not conclusively show that Verisk is likely to beat earnings this quarter as it lacks the key components. A stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:

(You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.)

Zacks ESP: Earnings ESP represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate. Both the Most Accurate estimate and the Zacks Consensus Estimate stand at 77 cents. So, the difference – the Earnings ESP – is 0.00%. 

Verisk Analytics, Inc. Price and EPS Surprise


Verisk Analytics, Inc. Price and EPS Surprise | Verisk Analytics, Inc. Quote

Zacks Rank: Verisk carries a Zacks Rank #4 (Sell)

Note that we caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks to Consider

Here are some stocks within the industry that you may want to consider, as our model shows that these have the right combination of elements to post an earnings beat:

Crestwood Equity Partners LP (CEQP - Free Report) , with an Earnings ESP of +160.00%, and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

American Railcar Industries, Inc. (ARII - Free Report) , with an Earnings ESP of +8.07%, and a Zacks Rank #2.

Apple Inc. (AAPL - Free Report) , with an Earnings ESP of +1.27%, and a Zacks Rank #3.

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