It has been about a month since the last earnings report for Broadridge Financial Solutions (BR - Free Report) . Shares have added about 10.4% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Broadridge Financial due for a pullback? 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.
Broadridge Surpasses Earnings Estimates in Q3
Broadridge reported mixed third-quarter fiscal 2019 results, with earnings beating but revenues lagging the Zacks Consensus Estimate.
Adjusted earnings of $1.59 cents per share beat the consensus mark by 10 cents and increased 59% on a year-over-year basis. Total revenues of $1.2 billion lagged the consensus mark by $3 million and were up $153 million or 14% year over year. The increase was driven by higher recurring fee revenues of $128 million, higher distribution revenues of $33 million and higher event-driven fee revenues of $2 million.
Revenues by Segment
Revenues in the Investor Communication Solutions segment increased 19% from the year-ago quarter’s level to $1 billion. The segment benefited from increase in event-driven and distribution revenues. Global Technology and Operations segment revenues came in at $237 million, up by $1 million from the year-ago quarter’s figure. The improvement was driven by higher net new business from closed sales, offset by lower internal growth.
Revenues by Type
Recurring fee revenues of $767 million rose 20% from the year-ago quarter’s level and were driven by net new business from increase in revenues from closed sales, higher internal growth and revenues from acquisitions. Event-driven fee revenues of $68 million increased 3% year over year, mainly due to increased mutual fund proxy revenues, partially offset by decreased equity proxy contests. Distribution revenues were up 9% year over year to $418 million.
Adjusted operating income of $256 million increased 68% year over year. Adjusted operating income margin increased to 20.9% from 14.2% in the prior-year quarter. Increase in recurring fee revenues led to the margin expansion.
Balance Sheet and Cash Flow
Broadridge exited the fiscal third quarter with cash and cash equivalents of $292.1 million compared with $249.8 million at the end of prior quarter. Long-term debt was $1.17 billion compared with $1.19 billion at the end of the prior quarter. The company generated $135.8 million of cash from operating activities and capex was $9.9 million in the quarter. Non-GAAP free cash flow was $119.8 million. Broadridge paid $56.1 million in dividends in the reported quarter.
Fiscal 2019 Guidance
Broadridge updated guidance for revenue growth, operating and adjusted operating income margins, and closed sales. Total revenues are expected to grow approximately 1% compared with the previous guidance of 3-5%. Operating income margin is expected to be approximately 15% compared with the previous expectation of 14.5%. Adjusted operating income margin is estimated to be approximately 17% compared with the previous estimation of 16.5%. Closed sales are anticipated to be between $200 million to $240 million, compared with the prior guidance of 185-225 million.
Broadridge reiterated guidance for recurring fee revenue growth, adjusted EPS growth and free cash flow. Recurring fee revenue growth is anticipated in the range of 5-7%. Adjusted EPS are expected to register 9-13% growth. Non-GAAP free cash flow is projected 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.
Currently, Broadridge Financial has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with an F. Charting a somewhat similar path, 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, Broadridge Financial has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.