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Verisk (VRSK) Up 10% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Verisk Analytics (VRSK - Free Report) . Shares have added about 10% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Verisk due for a pullback? 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 drivers.

Verisk Surpasses Q1 Earnings and Revenue Estimates 

Verisk Analytics reported solid first-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate.

Adjusted earnings per share of $1.17 beat the consensus mark by 2.6% and rose 13.6% on a year-over-year basis. The upside can be attributed to organic growth in the business and lower average share count.

Revenues of $689.8 million beat the consensus estimate by 0.6% and increased 10.4% year over year on a reported basis and 5% on an organic constant-currency (cc) basis.

Segmental Performance

Insurance segment revenues totaled $344.1 million, up 12.5% year over year on a reported basis and 8.4% in organic cc.

Within the segment, underwriting and rating revenues of $489.4 million rose 7.9% on a reported basis and 4.9% in organic cc. The upside was primarily driven byrise in prices derived from continued enhancements to the content of the solutions within industry-standard insurance programs, sale of expanded solutions to existing customers in commercial and personal lines as well as contributions from catastrophe modeling services.

Claims revenues amounted to $145.3 million, which declined 1.6% on a reported basis but inched up 0.4% in organic cc. The top line was negativelyimpacted by the injunction ruling against roof measurement solutions, which were partially offset by claims analytics revenues and repair cost estimating solutions revenues.

Energy and Specialized Markets segment revenues amounted to $160.1 million and increased 24.6% year over year on a reported basis and 2.6% in organic cc. The uptick can be attributed to growth in core research, increases in environmental health and safety service revenues as well as weather analytics revenues. These were partially offset by a decline in market and cost intelligence solutions due to implementation projects that did not reoccur as well as downfall in consulting revenues.

Financial Services segment revenues of $40.3 million declined 6.4% year over year on a reported basis but improved 3% in organic cc. Impact of portfolio transactions, which were closed in the quarter, led to decline in reported revenues. Revenue growth on an OCC basis was driven by rise in management information and regulatory reporting as well as fraud and credit risk, partially offset by downfall in portfolio management and spend-informed analytics.

Operating Results

Adjusted EBITDA of $318 million increased 9% on a reported basis and 7.4% in organic cc. Adjusted EBITDA margin came in at 46.1% compared with 46.7% in the prior-year quarter.

Operating income in the fourth quarter was $252.3 million compared with $202.4 million in the prior-year quarter. Operating margin rose to 36.6% from 32.3% in the year-ago quarter.

Balance Sheet and Cash Flow

Verisk exited first-quarter 2020 with cash and cash equivalents of $204.4 million compared with $184.6 million at the end of the prior quarter. Long-term debt of $2.65 billion was flat with prior-year quarter’s level.

The company generated $362.6 million of cash from operating activities and capex was $52.9 million. Free cash flow was $309.7 million.

Share Repurchases & Dividend Payout

During the reported quarter, Verisk returned $218 million to shareholders through dividend payouts and repurchases

During the first quarter, the company repurchased nearly 1.1 million shares at an average price of $154.56 for a total cost of $174 million. As of Mar 31, the company had $454 million available under its share repurchase authorization.

The company paid out a cash dividend of 27 cents per share on Mar 31. On Apr 29, the company's board of directors approved a quarterly cash dividend of 27 cents, payable on Jun 30, to shareholders of record as of Jun 15.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Verisk has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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 #2 (Buy). We expect an above average return from the stock in the next few months.


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