We reiterate our Neutral recommendation on Acxiom Corporation (ACXM). A proactive stance on advancing the company’s core competency areas and incipient buy-back activities are likely to partially neutralize the effects of the weak economic condition and ominous competition prevailing in the industry.
Acxiom has achieved a formidable position in the field of marketing services and technology. The company’s diversified product offerings such as AbiliTec Digital, InfoBase-X, Customer Data Integration (CDI) services and customer recognition software provide Acxiom a high competitive edge in this industry which includes big players such as Fair Issac Corp. (FICO), Camelot Information Systems Inc. (CIS) and CoStar Group Inc. (CSGP).
One aspect which has forever been an integral part of Acxiom’s total approach is its desire to return optimum value to its shareholders through buy back activities. The company has already repurchased 6.1 million shares at nearly $71 million till now in its fiscal year 2012. In addition, Acxiom has also recently declared that it has raised the amount pertaining to its share repurchase plan to a total of $150 million. Hence, on the basis of the company’s existing trends we can expect similar moves on the part of it in the upcoming quarters as well.
The company has taken several initiatives for emphasizing its core competency areas more with heavy investments and product launches which are perceived to be the growth drivers in the coming quarters for Acxiom. The company’s recent prestigious contract wins from Horizon Healthcare Services Inc. and Mindshare are also expected to positively influence Acxiom’s upcoming financial performances.
Although Acxiom’s intent and advances towards meeting long-term goals are remarkable, we are, however, concerned about the clouded fiscal scenario prevalent in the world today which may negatively affect the company. Acxiom is very much vulnerable to several factors such as adverse foreign exchange movements and inflationary pressures which can be detrimental to the company’s earnings and margins.
We recently observed quite a few changes in the company’s top-level management. The first of these changes was the appointment of Scott Howe as the new CEO and President. Second, Warren Jenson was also appointed as an Executive Vice President in the company. Such management shifts may have a pervasive impact on Acxiom’s overall functioning, goals and investor perception. Moreover, the company’s increasing focus on its core areas required high investments, due to which management declined its EPS projections for the upcoming fiscal year 2013 to a range of $0.55 - $0.65.
Hence, until the situation ameliorates and a brighter picture appears on the scene, we consider it wise to maintain a sideline stance on Acxiom. In the short run, we have a Zacks #3 Rank on the stock which translates into a short-term ‘Hold’ rating.
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