Dun & Bradstreet (DNB) Gains Despite Q4 Earnings Miss - Analyst Blog
Shares of Dun & Bradstreet Corp. (DNB) have gained nearly 3%, closing at $129.27 yesterday, since the company reported fourth-quarter and full year 2014 results on Feb 9. The company posted quarterly earnings of $2.61 per share that declined 5% from the year-ago quarter and also missed the Zacks Consensus Estimate of $2.64.
The Dun & Bradstreet Corporation - Earnings Surprise | FindTheBest
For 2014, the company reported earnings per share of $7.46, down 2% from the past year.
Revenues
Quarterly revenues increased 3% on a year-over-year basis to $489.8 million, which surpassed the Zacks Consensus Estimate of $486 million. For 2014, the company’s total revenue came in at $1,681.8 million compared with $1,655.2 million in 2013.
North America revenues increased 4% year over year to $379.9 million in the reported quarter. Risk Management Solutions - North America revenues increased 2% year over year to $187 million while Sales & Marketing Solutions - North America rose 5% from the year-ago quarter to $192.9 million in the reported quarter.
Revenues from the DNBi subscription plan in North America declined 4%, while non-DNBi subscription plans remained flat on a year-over-year basis. This was partially offset by a 13% revenue increase in Projects and Other Risk Management Solutions.
Risk Management Solutions International revenues declined 1% year over year, while Sales & Marketing Solutions International was up 3% from the year-ago quarter.
Overall, core revenues from Risk Management Solutions increased 1% year over year to $278.7 million in the quarter while those from Sales & Marketing solutions improved 5% on a year-over-year basis to $211.1 million.
Margins
Total operating costs as a percentage of revenues increased 330 basis points (bps) from the year-ago quarter due to higher selling & administration expense (up 6%).
The company’s operating margin increased 380 bps to 32.1% in the quarter. North America operating margin expanded 590 bps. International operating margin expanded 160 bps driven by strong growth in both Asia-Pacific and Europe & Other International markets.
Balance Sheet & Cash Flow
D&B ended the quarter with $319.4 million in cash and cash equivalents, up from $310 million in the previous quarter. Total debt was $1.33 billion compared with $1.32 billion at the end of the preceding quarter.
Dividend Increase
The company also declared that it has increased the quarterly cash dividend to $0.4625 per share from $0.44 per share earlier. The new dividend will be payable on Mar 11, 2015 to investors of record as of Feb 24, 2015.
Guidance
D&B also provided its outlook for 2015. Revenues are expected to increase 2% to 5%, before the effect of foreign exchange. However, operating income is expected to be down 5% to up 2%.
Earnings per share are expected to be down 3% to up 1%. Free cash flow is expected to be in the range of $255 million to $285 million for the full year.
All these projections include the impact of foreign exchange headwinds and NetProspex dilution.
Our Take
We believe that DNB’s high-margin business model, strong international growth potential, strategic investments, partnerships, accretive cloud-based acquisitions and aggressive share buyback will drive growth.
Also, the company is likely to benefit from partnerships with the likes of Salesforce.com (CRM), Oracle Corp., SugarCRM, Salesforce Wave analytics platform and Lattice Engines by broadening its offerings which in turn will drive top-line growth.
In Jan 2015, the company acquired NetProspex, a leading B2B professional contact data and data management services provider. This acquisition is likely to drive growth going forward.
However, increasing competition from companies such as Equifax Inc. (EFX) and Nielsen N.V. (NLSN) will continue to hurt revenues and profitability in the near term. Moreover, a higher debt level remains a concern.
Currently, D&B has a Zacks Rank #4 (Sell).
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