Broadridge Misses by a Penny - Analyst Blog
11 Fevereiro 2013 - 6:40AM
Zacks
Broadridge Financial
Solutions Inc. (BR) posted second-quarter fiscal 2013
adjusted earnings per share (EPS) of 17 cents, missing the Zacks
Consensus Estimate of 18 cents.
Revenues
Total revenues in the second quarter were $493.2 million, up 2.8%
from $479.8 million a year ago. The year-over-year improvement was
buoyed by increase in recurring revenues of approximately $9
million and higher distribution revenues of $3 million.
Broadridge managed to sustain a 99%
client retention rate. Recurring revenue closed sales were $19
million in the second quarter.
Segment
Revenues
The Investor Communication
Solutions segment generated $327.0 million in revenues, up 3.2%
from $316.8 million in the prior-year quarter. The increase was
attributable to higher recurring revenues from new business,
revenue gains from acquisitions, and higher distribution
revenues.
The Securities Processing Solutions
segment reported revenues of $163.8 million, up 1.7% from $161.1
million in the prior-year quarter. The increase was driven by
strength in new business, partially offset by decline in revenues
from the new outsourcing agreement with Apex Clearing Corporation,
replacing the terminated outsourcing agreement with Penson
Worldwide Inc.
Operating
Results
Total expenses in the quarter
decreased 0.1% year over year to $468.5 million. Reported pre-tax
income was $24.7 million, up from $10.6 million in the year-ago
quarter. Pre-tax margin grew 280 basis points year over year to
5.0%.
GAAP net income from continuing
operations increased 132.4% year over year to $15.8 million.
Earnings per share in the quarter grew 160.0% to 13 cents from 5
cents in the year-ago quarter. The significant increase in earnings
from the prior-year figures was due to the impact of the Penson
impairment charge and International Business Machines
Corp.'s (IBM) migration costs in the prior year.
The cost of migrating to IBM’s
platform follows an information technology services agreement
signed between the two companies in Mar 2010. As per the deal, IBM
will provide certain aspects of Broadridge’s information technology
infrastructure that are currently being provided under a data
center outsourcing services agreement with Automatic Data
Processing Inc. (ADP).
Excluding the effect of acquisition
amortization and other costs, restructuring and impairment charges,
adjusted net income was $21.8 million or 17 cents per share.
Balance Sheet
Broadridge exited the quarter with
cash and cash equivalents of $259.1 million, up from $211.8 million
in the prior quarter. Receivables decreased 5.0% from the previous
quarter to $305.2 million. Long-term debt remained sequentially
unchanged at $524.4 million.
Guidance
Reiterated
For fiscal 2013, Broadridge expects
revenue growth of 3.0% to 4.0%, and recurring revenue growth of
4.0% to 7.0%. The company expects recurring revenue closed sales to
be the key driver of revenue growth. Recurring revenue closed sales
are forecast in the range of $110.0 million to $150.0 million.
GAAP pretax margin is expected in
the range of 13.8% to 14.4%, while non-GAAP margin is expected
between 15.1% and 15.7%. Earnings per share are expected between
$1.60 and $1.70. However, excluding the effect of Penson charges,
adjusted EPS is still expected in the range of $1.76–$1.86.
Management also expects adjusted free cash flow in the range of
$200.0 million to $250.0 million.
Our Take
Though Broadridge earnings missed
the Zacks Consensus Estimate by a penny, the company’s sales were
above the prior-year figures. Despite positive momentum, Broadridge
reiterated its guidance for fiscal, which we believe is due to the
unpredictable nature of mutual fund proxy revenues.
The company believes that
outsourcing will be a key driver of its growth and we believe that
Broadridge seems to be in a good position to make such deals.
Broadridge entered into a 10-year Master Services Agreement with
Apex, under which Apex will outsource its securities processing and
back office support services to Broadridge. The company also states
that internal growth appears to be moving in a positive direction,
which is a bright spot in the quarter.
We remain optimistic on
Broadridge’s strategic acquisitions and new product launches, but
it faces significant competition from companies such as HD Supply
and DST Systems Inc. (DST), which have intensified
pricing pressure for the company.
Currently, Broadridge has a Zacks
Rank #3 (Hold).
AUTOMATIC DATA (ADP): Free Stock Analysis Report
BROADRIDGE FINL (BR): Free Stock Analysis Report
DST SYSTEMS (DST): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
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