Nielsen Holdings (NLSN) Tops Q2 Earnings on Higher Revenues - Analyst Blog

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Nielsen Holdings N.V. ( NLSN ) reported adjusted second-quarter 2014 earnings of 59 cents per share, beating the Zacks Consensus Estimate by a penny on higher revenues and solid global expansion. The adjusted earnings per share exclude one-time items but include stock-based compensation expenses.

Revenues

Nielsen reported revenues of $1.59 billion in the second quarter, up 7.1% sequentially and 15% from the year-ago quarter. The increase was due to higher demand for the company's analytics services and growth in retail and audience measurement business.

Revenues by Segment

Buy business which accounted for 56% of second-quarter revenues were $900 million, up 6.6% year over year or 7.9% on a constant currency basis. Excluding the Harris acquisition, Buy revenues grew 4.8% on a constant currency basis, driven by new client wins and increase in developing market revenues. Within the segment, Information Services contributed $676 million, up 5% on a constant currency basis. Insights Services grew 17.9% on a constant currency basis, driven by strength in developing markets and modest growth in North America. Revenues from developing markets grew 9.2% on a constant currency basis. Management expects to see double-digit growth in these markets, driven by growing local clients and steady progress with multinational clients in China, Latin America and India.

Watch business which accounted for the remaining 44% of second-quarter revenues were $694 million, up 28% year over year or 28.3% on a constant currency basis. The increase was driven by constant currency growth in audience measurement. The Watch segment includes such services as TV ratings, Internet and mobile audience measurement.

Operating Results

Reported gross margin for the quarter was 57.5%, down 70 basis points (bps) from the comparable year-ago quarter due to unfavorable mix.

Nielsen reported total operating expenses of $640.0 million, up 12.7% from $568.0 million incurred in the year-ago quarter. As a percentage of sales, selling, general & administrative expenses decreased from the year-ago quarter, while depreciation & amortization expenses remained flat. GAAP operating margin was 17.4%, up 20 bps from the year-ago quarter.

Net Income

Nielsen Holdings N V - Earnings Surprise | FindTheBest

On a GAAP basis, Nielsen recorded a net profit of $74 million or 19 cents per share compared with $426 million or $1.12 per share in the year-ago quarter.

On a non-GAAP basis, Nielsen generated adjusted net profit of $227.4 million compared with $157.7 million in the year-ago quarter. Pro-forma earnings came in at 59 cents per share compared with 41 cents in the year-ago quarter.

Balance Sheet & Cash Flow

Nielsen exited the second quarter with cash balance of approximately $310 million versus $301 million in the last quarter. Gross debt was $6,692 million versus $6,646 million in the prior quarter.

Net debt (gross debt excluding cash and cash equivalents) was $6,382 million and net debt leverage ratio was 3.66x at the end of the quarter.

Cash flow from operations increased to $210.0 million from $90.0 million in the prior quarter. Capex was $94 million versus $77 million in the prior quarter. Free cash flow was $116 million versus $13 million in the prior quarter.

Our Take

Nielsen Holdings is an information and measurement company which provides clients with media and marketing information about what consumers watch and buy on a global and local basis. The company's second-quarter earnings beat the Zacks Consensus Estimate on the back of higher revenues and solid international growth.

Management stated that the company's product launches such as TV/social media report are making good progress and will lead to revenue expansion in the near term. However, lack of visibility and macro uncertainty will likely hurt the share price in the near term.

Currently, Nielsen has a Zacks Rank #5 (Strong Sell). Other stocks that have been performing well and are worth a look include Analog Devices ( ADI ), Agilent Technologies ( A ) and Fairchild Semiconductor International Inc. ( FCS ). All these stocks carry the same Zacks Rank as Nielsen.


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: A , ADI , FCS , NLSN

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