Dun & Bradstreet Corp. (
reported mixed second quarter 2012 results. Although earnings
exceeded the Zacks Consensus Estimates by a dime, revenue was well
short of the consensus mark.
Total revenue decreased 1.1% (after the effect of foreign
exchange) year over year to $384.0 million. The year-over-year
decline was primarily due to weak results from the Risk management
solutions (down 3.1% year over year) and Internet solutions (flat
year over year) segment, partially offset by strong performance
from Sales & marketing solutions (up 4.1% year over year) in
the reported quarter.
Region-wise, the quarter was mixed for D&B. North American
revenue dipped 2.4% year over year to $279 million. International
revenue grew a modest 2.6% year over year to $105.0 million,
primarily driven by strong growth in the Asia-Pacific region (up
9.9%), partially offset by a decline in Europe and Other
International markets (down 2.5%).
Operating cost decreased 10.5% year over year to $285.3 million.
Selling, general & administrative expense plunged 9.8%;
operating expenses declined 12.0% and depreciation &
amortization was down 4.4% on a year-over-year basis in the
D&B's operating profit increased 5.2% year over year to
$114.0 million. Operating margin expanded 180 basis points in the
reported quarter, due to lower operating expenses.
Net income was $70.5 million or $1.50 per share compared with
$67.0 million or $1.35 per share in the year-ago quarter. This
significant year-over-year growth was driven by operating margin
D&B ended the quarter with $118.6 million in cash and cash
equivalents, slightly up from $117.7 million in the previous
quarter. Total debt was $1.01 billion versus $842.8 million at the
end of the preceding quarter. Free cash flow, excluding the impact
of legacy tax matters, was $57.4 million compared with $152.0
million in the previous quarter.
Strategic Technology Investment (MaxCV)
In February 2010, D&B initiated a two-year strategic
technology investment program known as MaxCV to strengthen its
leading position in commercial data and improve its current
technology platform to meet the ever-growing needs of customers.
The program is expected to accelerate revenue growth and reduce
expenses by improving data quality and timeliness, increase the
speed of product innovation and significantly reduce technology
In the second quarter of 2012, D&B incurred $10.5 million in
total pre-tax expenses for MaxCV. Moreover, it incurred $8.8
million in capital expenditures and additions to computer software
and other intangibles related to MaxCV. D&B expects to spend
$60.0 million for MaxCV in fiscal 2012.
Guidance for 2012
D&B expects core revenues to increase 0.0% to 3.0%, before
the effect of foreign exchange. Operating income is expected to
increase 4.0% to 7.0%, before non-core gains and charges.
Earnings are expected to grow in the 8.0% to 11.0% range, before
non-core gains and charges. D&B expects free cash flow between
$275.0 million and $305.0 million, excluding the impact of legacy
tax matters but includes investments in MaxCV.
We believe that D&B's high-margin business model, strong
international growth potential, emerging market growth
opportunities, strategic investments, incremental cost savings and
new product pipeline will drive growth over the long term.
However, we believe that the 2012 outlook reflects a sluggish
macro environment in North America and weakness in Europe.
Moreover, we believe that increasing competition from companies
Equifax Inc. (
Moody's Corp (
will also hurt profitability going forward.
We, therefore maintain our Neutral recommendation over the
long-term (6-12 months). Currently, D&B has a Zacks #4 Rank,
which implies a short-term Sell rating.
DUN &BRADST-NEW (DNB): Free Stock Analysis
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