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Nielsen (NLSN) Down 12.9% Since Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Nielsen Holdings Plc (NLSN - Free Report) . Shares have lost about 12.9% in that time frame.

Will the recent negative trend continue leading up to its next earnings release, or is NLSN due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Nielsen Q4 Earnings Up Y/Y, Revenues Match Estimates

Nielsen Holdings plc reported fourth-quarter 2017 net earnings of 52 cents per share, which increased18.2% year over year.

The earnings figure excludes a provisional non-cash tax charge of 29 cents per share.

Revenues

Reported revenues came in at $1.761 billion, increasing 6.3% year over year. The increase was driven by contribution from the acquisition of Gracenote, continued strength in the company’s Watch segment, and growth in emerging markets, partially offset by weakness in the U.S. Buy segment.

On a constant-currency basis, revenues increased 4.2%.

However, revenues were more or less in line with the Zacks Consensus Estimate of $1.762 billion.

Revenues by Segment

Watch business revenues were $913million (52% of total fourth quarter revenue), reflecting an increase of 15.9% year over year or 14.8% on a constant-currency basis. The increase came on the back of continued strength in Audience Measurement and Marketing Effectiveness, which improved 20.6% and 19.2%, respectively, on a constant-currency basis. Excluding the acquisition of Gracenote, Watch revenues increased 7.4% or 6.4% on a constant-currency basis.

Buy business revenues were $848 million (48% of total revenue), reflecting a decline of 2.3% year over year and 5.3% on a constant-currency basis. Excluding foreign currency impact, revenues fromthe Developed market declined 6.7% on a constant-currency basis due to softness in the U.S. market. However, revenues from emerging markets were up 7.4% or 4.8% on a constant-currency basis, driven bycoverage expansion and broad product offerings.

Operating Results

Reported gross margin was 58.3%, down 120 basis points (bps) from the year-ago period.

Nielsen’s operating expenses, namely selling, general and administrative expenses of $475 million, increased 3.3% from the year-ago figure. Therefore, operating margin decreased 30 bps year over year to 20.3%.

Adjusted EBITDA was $579 million in the fourth quarter, increasing 5.7% year over year or 3.8% on a constant currency basis.

Net Income

On a GAAP basis, Nielsen registered net profit of $81 million or 23 cents per share compared with $159 million or 44 cents in the year-ago quarter.

Balance Sheet & Cash Flow

Nielsen exited the quarter with cash balance of approximately $656 million compared with $662 million in the last quarter.

Net debt (gross debt excluding cash and cash equivalents) was $7.79 billion and net debt leverage ratio was 3.83x at the end of the quarter.

Cash flow from operations decreasedto $506 million in the fourth quarter from $538 million in the prior quarter and $543 million in the year-ago quarter. Capex was $156 million in the reported quarter. Free cash flow was $350 million in the fourth quarter compared with$425 million in the previous quarter and $476 million in the year-ago quarter.

Share Repurchase

The company repurchased $140 million of shares in 2017. It has a total of $298 million remaining for repurchase under the existing share repurchase program.

Outlook

For full-year 2018, management maintained its guidance. It expects total revenue growth on a constant-currency basis of 3%, adjusted EBITDA margin growth on a constant-currency basis of approximately 60bps and GAAP net income per share in the range of $1.40-$1.46. Also, free cash flow is expected to be approximately $800 million.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month. There have been two revisions higher for the current quarter compared with two lower.

Nielsen Holdings Plc Price and Consensus

 

Nielsen Holdings Plc Price and Consensus | Nielsen Holdings Plc Quote

VGM Scores

At this time, NLSN has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B.The stock was also allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Based on our scores, the stock is more suitable for growth investors than those looking for value and momentum.

Outlook

NLSN has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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