D&B reported mixed third-quarter results. While earnings
comprehensively beat the Zacks Consensus Estimate, revenues missed
the mark. We believe that the company's outlook reflects a sluggish
macroeconomic environment in its operating markets. Further, a
sequential decline in revenues in the Asia-Pacific market will
remain a concern in the near term. Moreover, we believe that
increasing competition will hurt profitability, going forward.
Nevertheless, 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. Thus, we
maintain a Neutral recommendation and set a price target of
Based in Short Hills, N.J., The Dun & Bradstreet Corporation
(DNB) is a leading provider of commercial information that serves a
diverse set of customer needs globally. The company has three core
product lines Risk Management Solutions, Sales & Marketing
Solutions and Internet Solutions.
Risk Management Solutions (63.0% of revenues in 2012) comprise
traditional solutions (74.0% of revenues in 2012), Value-Added Risk
Management solutions (20.0% of segment revenues) and Supply
Management solutions (9.0% of revenues in 2012). 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 (29.0% of revenues in 2012)
comprise the company's traditional solutions, such as marketing
lists, labels, education business and electronic licensing
solutions (30% of segment revenues). Value-added Solutions (70.0%
of segment revenues) offer data management software like Optimizer
and D&B360 product platform that integrates data into
third-party Customer Relationship Management (CRM)
Internet Solutions (8% of revenues in 2012) primarily comprise
Hoovers, which addresses online business information needs of
professionals and small businesses, such as information on
companies, customers, and prospects. Effective Jan 1, 2013, the
company started reporting Internet Solutions as a part of Sales
& Marketing Solution set.
D&B reported revenues (including revenues from divested
business) of $1.66 billion in 2012. The company reports business
primarily through three segments namely North America, Asia Pacific
and Europe and other International Markets. The company 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 2012.
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.
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