On Nov 13, we reaffirmed our Underperform recommendation on Acxiom Corporation (ACXM) due to its subdued fiscal 2014 second-quarter performance. Acxiom carries a Zacks Rank #4 (Sell).
Why the Underperform Recommendation?
On Nov 7, 2013, Acxiom, a major player in the field of marketing services and technology, announced second-quarter fiscal 2014 adjusted earnings of 20 cents per share, missing the year-ago tally by 4.8% and the Zacks Consensus Estimate by a penny.
Net income for the reported quarter dropped significantly by around 40% to $9.8 million or 13 cents per share. The year-over-year decline in reported earnings was primarily attributable to high operating and other expenses.
Total revenue for second-quarter fiscal 2014 came in at $276.3 million, down 0.4% year over year owing to dismal performance in two of the three segments, namely, the IT Infrastructure Management Services and the Other Services segments.
Moreover, operating margin declined to 7.1% from 10.9% in the year-ago quarter due to lower margin from the Marketing and Data Services segment, which accounted for the bulk of the revenues (around 73 %).
Management also lowered its revenue guidance for fiscal 2014. Management now projects revenues to dip marginally versus the earlier projection of flat revenues. However, earnings are still expected to remain flat.
In the future, Axciom intends to focus on its core areas of competency, which include database marketing and services. These new objectives are likely to involve high investments, which may adversely affect the company’s profits, going forward.
Following the unimpressive fiscal second-quarter results and soft outlook for the year, estimates were mostly revised downwards. The Zacks Consensus Estimate for fiscal 2014 and fiscal 2015 decreased marginally by a cent to 75 cents, over the last 30 days.
Based on the poor results, bleak guidance by the management and increased price competition, we have a negative stance on the company.