It has been about a month since the last earnings report for Verisk Analytics (VRSK - Free Report) . Shares have lost about 0.2% in that time frame, outperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Verisk 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.
Verisk Q1 Earnings Miss Estimates, Revenues Beat
Verisk Analytics’ first-quarter 2019 earnings missed the Zacks Consensus Estimate, while revenues beat the same.
Adjusted EPS of $1.03 missed the consensus estimate by a penny and declined 9.6% on a year-over-year basis. Quarterly revenues of $625 million beat the consensus mark by $4 million and improved 7.5% year over year on a reported basis. The figure improved 6.7% year over year on an organic constant-currency (cc) basis.
Insurance segment revenues totaled $451.2 million, up 9.3% year over year on a reported basis and 7.3% at organic cc.
Within the segment, underwriting and rating revenues of $303.5 million rose 8.2% on a reported basis and 6.8% at organic cc. The improvement was primarily driven by increases in industry-standard insurance programs, property-specific underwriting, and catastrophe modeling solutions revenues. Claims revenues amounted to $147.7 million, which improved 11.8% on a reported basis and 8.2% at organic cc. The uptick can be attributed to revenues from repair cost estimating, claims analytics and remote imagery solutions.
Energy and Specialized Markets segment revenues amounted to $130.8 million and improved 4.2% on a reported basis and 6.7% at organic cc. The improvement can also be attributed to revenues from environmental health and safety services, market and cost intelligence solutions and core research.
Financial Services segment revenues totaled $43 million, which slipped 0.1% on a reported basis but increased 0.7% at organic cc. Strength in spend-informed analytics solutions was offset by weakness in enterprise data management solutions.
Adjusted EBITDA of $291.8 million increased 8.2% on a reported basis and 6.8% at organic cc. Adjusted EBITDA margin was 46.7% compared with 46.4% in the prior-year quarter.
Adjusted EBITDA expenses (cost of revenues; selling, general and administrative expenses; investment income and others) increased 6.9% on a reported basis and 6.6% at organic cc. The upside was due to increased salaries and benefits associated with innovation and business growth.
Operating income in the first quarter was $202.4 million compared with $194.5 million in the prior-year quarter. Operating margin was 32.4% compared with 33.5% in the year-ago quarter.
Balance Sheet and Cash Flow
Verisk exited first-quarter 2019 with cash and cash equivalents of $179.5 million compared with $139.5 million in the prior quarter. Long-term debt at the end of the quarter was $2.4 billion compared with $2.1 billion at the end of the previous quarter.
The company generated $366.1 million of cash from operating activities and spent $45.2 million on capex. Free cash flow was $320.9 million.
During the quarter, the company repurchased 0.6 million shares for $75 million through an accelerated share repurchase (ASR) agreement. It entered into an additional $50 million ASR agreement. Shares repurchased will be delivered in the second quarter of 2019. As of Mar 31, 2019, the company had $353 million under its share repurchase authorization. Verisk paid dividend of $40.9 million in the quarter.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, Verisk has a nice Growth Score of B, a grade with the same score on the momentum front. However, 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 C. 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, Verisk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.