A month has gone by since the last earnings report for Broadridge Financial Solutions, Inc.BR . Shares have added about 15.8% in that time frame.
Will the recent positive trend continue leading up to its next earnings release, or is BR due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Broadridge Beats Q2 Earnings and Revenue Estimates
Broadridge Financial Solutions Inc. reported better-than-expected second-quarter fiscal 2018 results. Moreover, both revenues and earnings marked solid year-over-year improvement.
The company posted non-GAAP earnings of 79 cents per share (excluding acquisition and amortization related expenses), surpassing the Zacks Consensus Estimate of 58 cents. Also, quarterly earnings increased over twofold on a year-over-year basis.
Broadridge's fiscal second-quarter revenues of $1.013 billion increased 13.5% year over year. Moreover, it came ahead of the Zacks Consensus Estimate of $954 million. Better-than-expected revenues "from an elevated level of event-driven activity" were a catalyst.
Recurring fee revenues increased 5% during the quarter that included contribution from organic growth, Net New Business, internal growth and acquisition-related synergies. Event-driven fee revenues soared a whopping 227% to $97 million during the quarter, primarily due to higher proxy contest and mutual fund proxy activities. Distribution revenues during the quarter increased 7%, primarily due to favorable foreign-currency fluctuations.
Revenues from the Investor Communication Solutions segment (78% of total revenues) increased 13.9% from the year-ago quarter to $802.2 million. The improvement was attributable to higher recurring revenues from net new business, closed sales, elevated event-driven fee revenues, internal growth and acquisitions.
Global Technology and Operations segment (22% of total revenues) revenues came in at $228 million, reflecting an increase of 10.1% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales, internal growth and recent acquisition.
Broadridge's adjusted operating income margin expanded from 9.4% to 13.6%, primarily due to the higher recurring fee revenues and event-driven fee revenues. Selling, general and administrative expenses as a percentage of revenues contracted to 12.6% from 14.1% in the year-ago quarter. The company's adjusted net income of $94.7 million or 79 cents was up from $46.8 million or 39 cents in the year-ago period.
The company exited the quarter with cash and cash equivalents of $366.5 million compared with $288.8 million in the previous quarter. Long-term debt on the balance sheet totaled $1.223 billion.
The company generated operating cash flow of $141.8 million during the first half of fiscal 2018. Free cash flow came in at $89.3 million in the period.
Revised Fiscal 2018 Guidance
Broadridge revised its 2018 outlook. The company now projects revenue growth in the range of 2-4% compared with the earlier guidance of 2-3%. Similarly, adjusted earnings are now projected to increase in the range of 27-31%, up from the previous expected range of 15-19%. Management also raised free cash flow guidance range to $500-$550 million of $400-$450 million.
The company reiterated its recurring revenue growth and adjusted operating margin guidance. Recurring revenue growth is expected in the range of 4-6%. Adjusted operating income margin is still estimated to be approximately 16%.
How Have Estimates Been Moving Since Then?
In the past month , investors have witnessed an upward trend in fresh estimates. There have been three revisions higher for the current quarter.
Broadridge Financial Solutions, Inc. Price and Consensus
At this time, BR has a strong Growth Score of A, though it is lagging a lot on the momentum front with a C. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Our style scores indicate that the stock is more suitable for growth investors than momentum investors.
Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise BR has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.