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Broadridge (BR) Misses Earnings and Revenue Estimates in Q2

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Broadridge Financial Solutions, Inc. (BR - Free Report) reported disappointing second-quarter fiscal 2019 results, with earnings and revenues lagging the Zacks Consensus Estimate.

Adjusted earnings of 56 cents per share missed the consensus mark by 15 cents and declined 29% on a year-over-year basis. Total revenues of $953 million lagged the consensus mark by $17 million and fell 6% year over year.

So far this year, shares of Broadridge have gained 13% compared with the 14.5% rise of the industry.

Let’s check out the numbers in detail.

Revenues by Segment

Revenues in the Investor Communication Solutions segment fell 8% from the year-ago quarter’s level to $738 million. The decrease was due to fall in event-driven and distribution revenues, partially offset by increase in recurring fee revenues.

Global Technology and Operations segment revenues came in at $237 million, up 4% from the year-ago quarter’s tally. The figure was driven by internal growth from higher trade levels and net new business from closed sales.

Revenues by Type

Recurring fee revenues of $604 million rose 7% from the year-ago quarter’s level and were driven by organic growth, recent acquisitions and impact of revenue accounting change. Event-driven fee revenues of $48 million plunged 51% year over year, mainly due to lower mutual fund proxy revenues and equity proxy contests.

Distribution revenues were down 13% year over year to $323 million. Changes in foreign currency rates negatively impacted revenues by $4 million compared with the prior-year quarter’s period.

Broadridge Financial Solutions, Inc. Revenue (TTM)

 

Operating Results

Adjusted operating income of $101 million fell 27% year over year. Adjusted operating income margin decreased to 10.6% from 13.7% in the prior-year quarter. Decline in event-driven fee revenues, higher selling expenses and increased spending on technology initiatives led to margin contraction.

Balance Sheet and Cash Flow

Broadridge exited second-quarter fiscal 2019 with cash and cash equivalents of $249.8 million compared with $204.7 million at the end of prior quarter. Long-term debt was $1.19 billion compared with $1.14 billion at the end of the prior quarter.

The company generated $177.6 million of cash from operating activities and spent $12.3 million on capex in the quarter. Non-GAAP free cash flow was $162.8 million.  Broadridge paid $56.5 million in dividends in the reported quarter.

Fiscal Third Quarter Guidance

Management expects total revenues in the range of $1,195-$1,245 million, higher than the Zacks Consensus Estimate of $1,280 million. Recurring fee revenue growth is anticipated between $755 million and $780 million. Adjusted EPS are expected in the range of $1.40-$1.56 per share. The Zacks Consensus Estimate is pegged at $1.56.

Fiscal 2019 Guidance

Broadridge reaffirmed guidance for fiscal 2019. Total revenues are expected to grow in the range of 3-5%. Recurring fee revenue growth is anticipated in the 5-7% range. Adjusted EPS are expected to register 9-13% growth.

Adjusted operating income margin is estimated to register approximately 16.5% growth. Non-GAAP free cash flow is projected in the range of $565-$615 million.

Zacks Rank & Stocks to Consider

Broadridge currently carries a Zacks Rank #4 (Sell).

Investors interested in the broader Zacks Business Services sector are keenly awaiting fourth-quarter 2018 earnings reports of key players like IQVIA Holdings (IQV - Free Report) , Waste Management (WM - Free Report) and TransUnion (TRU - Free Report) . These companies are scheduled to release results on Feb 14, before market opens. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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