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Broadridge (BR) Q4 Earnings In Line, Revenues Fall Short

Broadridge Financial Solutions Inc. BR posted fourth-quarter fiscal 2016 adjusted earnings of $1.45 per share (excluding acquisition and amortization related expenses), which matched the Zacks Consensus Estimate. However, earnings were up from $1.40 per share reported in the year-ago quarter.

 

Broadridge Financial Solutions Inc. (BR) Street EPS & Surprise Percent - Last 5 Quarters | FindTheCompany

 

Quarter Details

Though Broadridge’s fourth-quarter revenues of $974.5 million increased 4.8% year over year, it lagged the Zacks Consensus Estimate of $994 million. The year-over-year increase was driven by recurring fee revenues (up 7%), including contribution from Net New Business and acquisitions related synergies. Recurring revenues from closed sales during the quarter were $57 million, up 46% on a year-over-year basis.

Revenues from the Investor Communication Solutions segment (82% of total revenue) increased 4.9% from the year-ago quarter to $803.6 million. The improvement was attributable to higher recurring revenues from new business, higher event-driven fee, higher distribution revenues and recent acquisitions.

The Global Technology and Operations segment (19% of total revenue) reported revenues of $189.7 million, up 6.8% from the year-ago quarter. The increase was driven by higher Net New Business and encouraging internal growth.

Broadridge’s adjusted operating income margin contracted from 29.1% to 28.6%. Selling, general and administrative expenses as a percentage of revenues were almost flat on a year-over-year basis and came in at 12.1%. The company reported adjusted net income of $175.6 million or $1.45 per share, up from $171.5 million or $1.40 per share in the year-ago comparable period.

Broadridge exited the quarter with cash and cash equivalents of $727.7 million compared with $354.4 million in the previous quarter. Long-term debt on the balance sheet totaled $897.6 million.

Cash flow provided by operating activities during twelve months ended Jun 30, 2016 was $437.7 million. Free cash flow came in at $362.2 million. In fiscal 2016, the company repurchased shares worth $71 million and paid a dividend of $138 million. Also, the company increased its annual dividend by 10% to $1.32 per share.

Fiscal 2017 Guidance

Broadridge provided its 2017 outlook. It projects revenue growth in a range of 43% to 45%, while recurring revenue growth is expected in a range of 29% to 31%. The company expects recurring revenues from closed sales to be a key growth driver and range within $140 million to $180 million. Adjusted operating income margin is expected to be approximately 15%. Adjusted earnings are expected to increase in a range of 12% to 17%. Management expects free cash flow to range within $350 million to $400 million.

BROADRIDGE FINL Price, Consensus and EPS Surprise

BROADRIDGE FINL Price, Consensus and EPS Surprise | BROADRIDGE FINL Quote

Our Take

Broadridge reported not-so-encouraging fourth-quarter results. However, year-over-year comparisons on both the counts were favorable driven by higher recurring revenues, contribution from Net New Business, higher distribution revenues and acquisition-related synergies. The company also provided fiscal 2017 guidance.

We remain optimistic about Broadridge’s strategic acquisitions, product launches, share repurchase program and dividend paying initiatives. We also believe that the company’s close association with Accenture ACN will be beneficial over the long term. However, competition from DST Systems Inc. DST and pricing pressure remain headwinds.

Currently, Broadridge has a Zacks Rank #2 (Buy). A better-ranked stock worth considering is Facebook, Inc. FB, sporting a Zacks Rank #1 (Strong Buy).

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DST SYSTEMS (DST): Free Stock Analysis Report
 
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