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Why Is IHS Markit (INFO) Down 6.3% Since Last Earnings Report?

It has been about a month since the last earnings report for IHS Markit (INFO). Shares have lost about 6.3% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is IHS Markit due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

IHS Markit Q3 Earnings Surpass Estimates, View Up

IHS Markit reported better-than-expected third-quarter fiscal 2018 results.

Adjusted EPS of 58 cents outpaced the Zacks Consensus Estimate of 55 cents and increased 2% on a year-over-year basis. Total revenues came in at $1 billion, which surpassed the consensus mark of $969 million and improved 11% from the year-ago quarter number.

Segmental Revenues

Revenues at the Resources segment totaled $212 million, up 5% year over year, with recurring revenues rising 4% organically. The Transportation segment experienced year-over-year revenue growth of 16% to reach $297 million. Recurring revenues at this segment grew 10% organically.

Revenues at the CMS segment amounted to $137 million, down 1% year over year, with 3% organic growth of recurring revenues. The Financial services segment's revenues improved 16% year over year to $355 million and included 8% total organic growth.

Revenues by Transaction Type

Recurring fixed revenues of $717.7 million, rose 13% year over year on a reported basis and 7% on an organic basis. Recurring variable revenues grew 14% year over year on a reported basis and 8% organically to $124.8 million. Non-recurring revenues summed $158.5 million, up 1% year over year on a reported as well as organic basis.

Operating Performance

Adjusted EBITDA of $390.5 million, increased 11% from the year-ago quarter. Adjusted EBITDA margin improved 20 basis points (bps) year over year to 39%.

Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDAs were $85 million (4% year-over-year decline), $128 million (16% year-over-year growth), $30 million (5% decline) and $156 million (13% growth), respectively.

Adjusted EBITDA margins expanded 30 bps at the Transportation segment. The same declined a respective 360 bps, 100 bps and 100 bps for the Resources, CMS and Financial Services segments.

Key Balance Sheet and Cash flow Figures

IHS Markit ended the quarter with a cash and cash equivalent balance of $154.4 million compared with $159 million in the prior quarter. Long-term debt was $4.9 billion at the end of the fiscal third quarter compared with $4.4 billion at the end of the prior quarter.

Cash flow from operations and free cash flow amounted to $346.4 million and $292.6 million, respectively, in the quarter.

Fiscal 2018 Outlook

IHS Markit raised its fiscal 2018 guidance. Revenues are now expected in the range of $4-$4.02 billion, including organic growth of 6%. Previously, revenues were anticipated in the $3.85-$3.90 billion band, including organic growth of 5-6%.

Adjusted EBITDA is now envisioned in the range of $1.550-$1.560 billion compared with the previous guidance of $1.500-$1.525 billion. The company raised the lower limit of Adjusted EPS guidance. Adjusted EBITDA is now projected in the range of $2.25-$2.27 compared with the earlier guidance of $2.23-$2.27.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.59% due to these changes.

VGM Scores

At this time, IHS Markit has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, IHS Markit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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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 Nasdaq, Inc.


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

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