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IHS Markit (INFO) Q3 Earnings Surpass Estimates, View Up

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IHS Markit Ltd. (INFO - Free Report) reported better-than-expected third-quarter fiscal 2018 results.

Adjusted EPS of 58 cents outpaced the Zacks Consensus Estimate of 55 cents and increased 2% on a year-over-year basis. Total revenues came in at $1 billion, which surpassed the consensus mark of $969 million and improved 11% from the year-ago quarter number.

The company’s strong results were driven by continued focus on operational execution. So far this year, the stock has gained 20.3%, outperforming the S&P 500’s 9.2% rally.

Segmental Revenues

Revenues at the Resources segment totaled $212 million, up 5% year over year, with recurring revenues rising 4% organically. The Transportation segment experienced year-over-year revenue growth of 16% to reach $297 million. Recurring revenues at this segment grew 10% organically.

Revenues at the CMS segment amounted to $137 million, down 1% year over year, with 3% organic growth of recurring revenues. The Financial services segment’s revenues improved 16% year over year to $355 million and included 8% total organic growth.

Revenues by Transaction Type

Recurring fixed revenues of $717.7 million, rose 13% year over year on a reported basis and 7% on an organic basis. Recurring variable revenues grew 14% year over year on a reported basis and 8% organically to $124.8 million. Non-recurring revenues summed $158.5 million, up 1% year over year on a reported as well as organic basis.

IHS Markit Ltd. Revenue (TTM)

Operating Performance

Adjusted EBITDA of $390.5 million, increased 11% from the year-ago quarter. Adjusted EBITDA margin improved 20 basis points (bps) year over year to 39%.

Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDAs were $85 million (4% year-over-year decline), $128 million (16% year-over-year growth), $30 million (5% decline) and $156 million (13% growth), respectively.

Adjusted EBITDA margins expanded 30 bps at the Transportation segment. The same declined a respective 360 bps, 100 bps and 100 bps for the Resources, CMS and Financial Services segments.

Key Balance Sheet and Cash flow Figures

IHS Markit ended the quarter with a cash and cash equivalent balance of $154.4 million compared with $159 million in the prior quarter. Long-term debt was $4.9 billion at the end of the fiscal third quarter compared with $4.4 billion at the end of the prior quarter.

Cash flow from operations and free cash flow amounted to $346.4 million and $292.6 million, respectively, in the quarter.

Fiscal 2018 Outlook

IHS Markit raised its fiscal 2018 guidance.  Revenues are now expected in the range of $4-$4.02 billion, including organic growth of 6%.  Previously, revenues were anticipated in the $3.85-$3.90 billion band, including organic growth of 5-6%.

Adjusted EBITDA is now envisioned in the range of $1.550-$1.560 billion compared with the previous guidance of $1.500-$1.525 billion. The company raised the lower limit of Adjusted EPS guidance. Adjusted EBITDA is now projected in the range of $2.25-$2.27 compared with the earlier guidance of $2.23-$2.27.

Zacks Rank & Other Stocks to Consider

Currently, IHS Markit has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Business Services sector include CRA International (CRAI - Free Report) , FTI Consulting (FCN - Free Report) and NV5 Global (NVEE - Free Report) . While CRA International and FTI Consulting sport a Zacks Rank #1 (Strong Buy), NV5 Global carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

CRA International, FTI Consulting and NV5 Global have an impressive earnings surprise history, with an average four-quarter surprise of 38.6%, 58.3% and 12.7%, respectively.

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