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Why Is Verisk (VRSK) Up 3.6% Since Last Earnings Report?

A month has gone by since the last earnings report for Verisk Analytics (VRSK). Shares have added about 3.6% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Verisk due for a pullback? 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 catalysts.

Verisk Analytics Tops Q2 Earnings & Revenue Estimates

Verisk Analytics reported impressive second-quarter 2018 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.06 surpassed the Zacks Consensus Estimate of $1.01 and improved 29.3% on a year-over-year basis. Earnings were driven by strong organic growth, 2017 tax reform and contributions from acquisitions. However, these were partially offset by increased depreciation and amortization, interest expenses as well as higher share count.

Quarterly revenues of $601.3 million beat the Zacks Consensus Estimate of $586.2 million. The figure improved 14.9% year over year on a reported basis and 7.4% on an organic constant-currency (cc) basis. The growth was driven by strength across all three segments - Insurance, Energy and Specialized Markets as well as Financial.

Segmental Performance

Insurance segment revenues came in at $429.4 million, up 12.3% year over year on a reported basis and 8.4% at organic cc.

In the segment, underwriting and rating revenues of $288.9 million was up 10.3% on a reported basis and 6.2% at organic cc. The improvement was primarily driven by strength in the company's catastrophe modeling services and underwriting solutions. Claims revenues of $140.5 million improved 16.7% on a reported basis and 13.2% at organic cc. The uptick can be attributed to revenues from repair cost estimating solutions, claims analytics and aerial imagery solutions.

As energy business' end market continues to improve, Energy andSpecialized Markets segment revenues of $129.9 million were up 17.7% on a reported basis and 5% at organic cc. The improvement can also be attributed to revenues from environmental health and safety services as well as favorable impact of currency fluctuations.

Financial Services segment revenues of $42 million increased 37.7% on a reported basis and 4.4% at organic cc. Growth in revenues from enterprise data management and portfolio management solutions led to the improvement.

Operating Results

Adjusted EBITDA of $290.8 million increased 14.4% on a reported basis and 8.9% at organic cc. Organic adjusted EBITDA margin was 49.6% compared with 48.9% in the prior-year quarter.

Adjusted EBITDA expenses (cost of revenues; selling, general and administrative expenses; investment income and others) increased 15.4% on a reported basis and 5.9% at organic cc. The upside was primarily driven by increased salaries and benefits associated with innovation and business growth.

Operating income for second-quarter was $212.3 million compared with $195 million. Operating margin was 35.3% compared with 37.3% in the year-ago quarter.

Balance Sheet and Cash Flow

Verisk Analytics exited second-quarter 2018 with cash and cash equivalents balance of $132 million compared with $149.8 million in the last reported quarter. Long-term debt at the end of the quarter was $2.04 billion, flat sequentially.

The company generated $207.2 million of cash from operating activities compared with $327 million in the last reported quarter. Adjusted free cash flow was $151.1 million compared with $283.8 million at the end of the last reported quarter.

The company repurchased 1.3 million shares for $141 million. During the quarter, it also entered into an accelerated share repurchase (ASR) agreement worth $50 million, wherein shares repurchased will be delivered in the third quarter of 2018. As of Jun 30, 2018, the company had $686 million remaining under its share repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Verisk has an average Growth Score of C, however its Momentum Score is doing a lot better with an A. However, 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 C. 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 momentum investors than growth investors.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Verisk 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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