Broadridge Financial Solutions, Inc. 's BR fourth-quarter fiscal 2018 results missed the Zacks Consensus estimate on both counts.
Adjusted earnings of $1.86 per share missed the consensus mark by 2 cents but came ahead of the year-ago figure by 15 cents. The year-over-year improvement can be attributed mainly to lower tax rates (as a result of the Tax Cuts and Jobs Act). Notably, Broadridge enjoyed a lower effective tax rate of 19.8% compared with 34.3% in the year-ago quarter.
Total revenues of $1.32 billion lagged the consensus estimate by $6.6 million and fell short of the year-ago figure by $26 million. Event-driven fee revenues and distribution revenues decreased significantly.
Recurring fee revenues of $862 million increased 7% from the year-ago quarter driven by organic growth and recent acquisitions. There was a positive impact of $2 million on revenues from foreign currency movements.
In the reported quarter, Broadridge completed two acquisitions. In May, the company completed the purchase of FundAssist Limited at an aggregate price of $47 million. In June, the company completed the purchase of MackayWilliams LLP at an aggregate price of $8 million.
So far this year, shares of Broadridge have gained 28.3% compared with the 10.6% rise of the industry it belongs to.
Let's check out the numbers in detail.
Revenues by Segment
Investor Communication Solutions segment (84% of total revenues) revenues decreased 3.8% from the year-ago quarter to $1.11 billion. Under this segment, recurring fee revenues of $628 million increased 7% from the year-ago quarter due to internal growth, net new business from increases in revenue from closed sales and revenues from acquisitions. Event-driven fee revenues of $61 million decreased 33% year over year due to decrease in mutual fund proxy and equity proxy contests. Distribution revenues decreased 11% to $423 million.
Global Technology and Operations segment (17%) revenues came in at $233.5 million, up 7.8% from the year-ago quarter. Segment revenues were driven by internal growth from higher trade and non-trade activity levels and higher net new business from increase in revenues from closed sales.
Adjusted operating income of $290 million decreased 10.5% year over year. Adjusted operating income margin decreased to 21.9% from 24.1% in the prior-year quarter. Decrease in event-driven fee revenues and rise in other operating expenses, including growth initiatives, resulted in the margin contraction. Total operating expenses increased 0.6% to $1.06 billion.
Broadridge Financial Solutions, Inc. Price, Consensus and EPS Surprise
Broadridge Financial Solutions, Inc. Price, Consensus and EPS Surprise | Broadridge Financial Solutions, Inc. Quote
Balance Sheet and Cash Flow
Broadridge exited fourth-quarter fiscal 2018 with cash and cash equivalents of $263.9 million compared with $352.1 million at the end of prior quarter. Long-term debt was $1.05 billion compared with $1.20 billion at the end of the prior quarter.
The company generated $418.8 million of cash from operating activities in the reported quarter. Adjusted free cash flow was $391.5 million. Capital expenditures were $21.9 million.
On Aug 6, 2018, the board of directors of Broadridge declared a quarterly dividend of 48.5 cents per share payable on Oct 3 to shareholders of record on Sep 18. This includes a dividend hike of 33% to $1.94 per share from $1.46. This marks the eleventh consecutive year of annual dividend increase since the company has become public in 2007.
In the reported quarter, Broadridge paid $42.8 million in dividends. In fiscal year 2018, Broadridge paid $165.8 million in dividends.
Fiscal 2019 Guidance
Broadridge provided guidance for fiscal year 2019. Total revenues are expected to grow in the range of 3-5%. Recurring revenue growth is expected in the range of 5-7%. Adjusted earnings per share are expected to register 9-13% growth.
Adjusted operating income margin is estimated to be register approximately 16.5% growth. Adjusted free cash flow expectations lie in the range of $565-$615 million.
Zacks Rank & Upcoming Releases
Broadridge currently carries a Zacks Rank #4 (Sell).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .
Investors interested in the broader Business Services sector are keenly awaiting second-quarter earnings reports from key players like Dun & Bradstreet Corporation DNB , Delphi Technologies DLPH and Worldpay WP . While Dun & Bradstreet and Delphi Technologies will report their quarterly numbers on Aug 8, Worldpay will release results on Aug 9.
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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dun & Bradstreet Corporation (The) (DNB): Free Stock Analysis Report Delphi Technologies PLC (DLPH): Free Stock Analysis Report Broadridge Financial Solutions, Inc. (BR): Free Stock Analysis Report Vantiv, Inc. (WP): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research