Dun & Bradstreet Corp.
) reported third quarter 2012 earnings of $1.76 per share, which
was ahead of the Zacks Consensus Estimate of $1.60 and increased
23.9% from the year-ago quarter.
Core revenue (after the effect of foreign exchange) of $413.2
million was up a modest 0.6% year over year and surpassed the
Zacks Consensus Revenue Estimate of $412.0 million.
Revenue for the quarter was positively impacted by a 9.5%
growth in Sales & marketing solutions segment, which offset a
2.6% annual decline in Risk management solutions and a 2.0%
year-over-year decline in Internet solutions business
D&B recorded a 1.2% increase in revenues (after the effect
of foreign exchange) from North America, while its International
revenue (after the effect of foreign exchange) was down 1.1% on a
year-over-year basis. Among its international revenue,
Asia-Pacific recorded growth of 3.7% offset by a 4.4% decline in
revenue from Europe and other international markets.
Operating costs decreased 10.4% year over year to $303.5
million. Selling, general & administrative expenses decreased
5%; operating expenses declined 17.3% and depreciation &
amortization was down 3% on a year-over-year basis in the
D&B's operating profit increased 8% year over year to
$127.9 million. The year-over-year increase was primarily
attributable to reengineering savings and savings on account of
businesses that were divested. Operating margin of 30.9% expanded
210 basis points ("bps") from the year-ago quarter primarily due
to lower costs.
Net income was $79.4 million or $1.76 per share compared with
$69.9 million or $1.42 per share in the year-ago quarter. This
significant year-over-year growth was driven by operating margin
D&B ended the quarter with $137.0 million in cash and cash
equivalents, up from $118.6 million in the previous quarter.
Total debt was $1.02 billion versus $1.01 billion at the end of
the preceding 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 third quarter of 2012, D&B incurred $6.7 million in
total pre-tax expenses for MaxCV. Moreover, it incurred $6.1
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 remain flat to up 3.0%,
before the effect of foreign exchange. Operating income is
expected to increase in the range of 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
However, we believe that the 2012 outlook reflects a sluggish
macroeconomic environment in North America and weakness in
Europe. Moreover, we believe that increasing competition from
) 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 #3 Rank,
which implies a short-term Hold rating.
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