D&B reported mixed first-quarter 2014 results. Although
earnings surpassed the Zacks Consensus Estimate, revenues lagged
the same. The company provided cautious revenue guidance due to
sluggish growth prospect of the core risk management solution
business. The company continues to upgrade its core DNBi solution
to cloud, which will attract customers over the long term. However,
this transition will affect top-line growth in the near term.
Moreover, additional investments in cloud upgrade will hurt
profitability. Further, a highly leveraged balance sheet and
intense competition are the major headwinds. Nevertheless, we
believe that D&B's high-margin business model, strong
international growth potential, strategic investments, partnerships
with Salesforce.com, SugarCRM and First Rain, accretive cloud-based
acquisitions and aggressive share buyback will drive growth in the
long run. We maintain our Neutral recommendation on the stock and
set a price target of $118.00.
Based in Short Hills, NJ, The Dun & Bradstreet Corporation
(DNB) is a leading provider of commercial information that serves a
diverse set of customer needs globally. D&B reported revenues
(including revenues from divested business) of $1.66 billion in
2013. The company has two core product lines Risk Management
Solutions and Sales & Marketing Solutions.
Risk Management Solutions (63.0% of revenues in 2013) comprise
traditional solutions (61.0% of revenues in 2013), Value-Added Risk
Management solutions (31.0% of segment revenues) and Supply
Management solutions (8.0% of revenues in 2013). The traditional
solutions primarily include core DNBi product line, as well
database reports, which are used primarily by customers for making
decisions about new credit applications. Value-added Solutions
generally support automated decision-making and portfolio
management. Customers use Supply Management Solutions to better
understand the financial risk of their supply chain.
Sales and Marketing Solutions (37.0% of revenues in 2013)
comprise the company's traditional solutions, such as marketing
lists, labels, education business and electronic licensing
solutions (38% of segment revenues). Value-added Solutions (62.0%
of segment revenues) offer data management software like Optimizer
and D&B360 product platform that integrates data into
third-party Customer Relationship Management (CRM)
D&B serves banks and other credit & financial
institutions, manufacturers, wholesalers, retailers, government
agencies, insurance companies and telecommunication companies, as
well as sales, marketing and business development professionals.
None of the customers accounted for more than 10% of revenues in
D&B faces significant competition in most of its geographic
markets not only from local information providers but also from the
likes of Equifax, Experian, infoGROUP and Graydon.
Dun & Bradstreet Corporation (DNB): Read the
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