It has been about a month since the last earnings report for Broadridge Financial Solutions (BR - Free Report) . Shares have lost about 5.1% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Broadridge Financial due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.
Broadridge Q1 Earnings Beat, Revenues Miss Estimates
Broadridge Financial Solutions reported mixed first-quarter fiscal 2019 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of 79 cents per share outpaced the consensus mark by 9 cents and increased 46% on a year-over-year basis. The improvement can be attributed to continued organic growth, higher event-driven revenues and a lower tax rate. Notably, Broadridge enjoyed a lower effective tax rate of 14.1% compared with 32.8% in the year-ago quarter.
Total revenues of $973 million lagged the consensus estimate by $2 million but increased 5% year over year. Recurring fee revenues of $575 million rose 5% from the year-ago quarter level driven by organic growth and recent acquisitions, partially offset by impact of revenue accounting change.
Event-driven fee revenues of $77 million increased 30% year over year, mainly backed by increased mutual fund proxy activity, partially offset by decreased equity proxy contests. Distribution revenues were up $7 million or 2% year over year to $341 million. Changes in foreign currency rates negatively impacted revenues by $4 million compared to the prior-year period.
Revenues by Segment
Investor Communication Solutions segment revenues increased 5% from the year-ago quarter to $766 million. Under this segment, recurring fee revenues of $347 million were up 4% from the year-ago quarter. The uptick was driven by net new business from increases in revenue from closed sales and revenues from acquisitions, partially offset by decline in internal growth.
Event-driven fee revenues of $77 million rose 30% year over year, courtesy of increase in mutual fund proxy, partially offset by decline in equity proxy contests. Distribution revenues increased 2% to $341 million.
Global Technology and Operations segment revenues came in at $228 million, up 6% from the year-ago quarter. Segment revenues were driven by internal growth from higher trade levels and higher net new business from closed sales, partially offset impact of the revenue accounting change.
Adjusted operating income of $123 million increased 15% year over year. Adjusted operating income margin expanded to 12.6% from 11.5% in the prior-year quarter. Increase in recurring fee revenues and event-driven fee revenues led to the margin expansion.
Balance Sheet and Cash Flow
Broadridge exited first-quarter fiscal 2019 with cash and cash equivalents of $204.7 million compared with $263.9 million at the end of prior quarter. Long-term debt was $1.14 billion compared with $1.05 billion at the end of the prior quarter.
The company used $95.5 million of cash in operating activities in the reported quarter. Capital expenditures were $8.7 million. Non-GAAP free cash flow was $111 million. Broadridge paid $42.5 million in dividends in the quarter.
Fiscal 2019 Guidance
Broadridge reaffirmed guidance for fiscal 2019. Total revenues are expected to grow in the range of 3-5%. Recurring revenue growth is expected in the 5-7% band. Adjusted earnings per share are expected to register 9-13% growth.
Adjusted operating income margin is estimated to be register approximately 16.5% growth. Non-GAAP free cash flow expectations lie in the range of $565-$615 million.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -12.15% due to these changes.
At this time, Broadridge Financial has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Broadridge Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.