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IHS Markit (INFO) Q1 Earnings Surpass Estimates, Revenue Lag

Zacks Equity Research

IHS Markit Ltd. INFO reported mixed first-quarter fiscal 2019 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings per share of 60 cents beat the consensus mark by 3 cents and increased 13% on a year-over-year basis. Total revenues came in at $1.05 billion, missing the consensus mark of $1.06 billion but improving 12% from the year-ago quarter.

We observe that shares of IHS Markit have gained 11.8% over the past year, outperforming 9.7% rally of the industry it belongs to.

Segmental Revenues

Revenues at the Resources segment totaled $216.8 million, up 6% year over year, with recurring revenues rising 5% organically. The Transportation segment experienced year-over-year revenue growth of 7% to reach $288.1 million. Recurring revenues at this segment grew 9% organically.

Revenues at the CMS segment amounted to $132.3 million, down 4% year over year, with no organic growth in recurring revenues. Financial services segment’s revenues increased 28% year over year to $409.2 million with recurring revenues increasing 6% organically.

Revenues by Transaction Type

Recurring fixed revenues of $767.2 million rose 12% year over year on a reported basis and 5% on an organic basis. Recurring variable revenues grew 16% year over year on a reported basis and 3% organically to $136 million. Non-recurring revenues totaled $143.2 million, up 9% year over year on a reported basis and 8% on an organic basis.

IHS Markit Ltd. Revenue (TTM)


IHS Markit Ltd. Revenue (TTM) | IHS Markit Ltd. Quote


Operating Performance

Adjusted EBITDA of $408.1 million increased 14% from the year-ago quarter. Adjusted EBITDA margin improved 40 basis points (bps) year over year to 39%.

Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDA was $93.2 million (up 9.8% year-over-year), $114.3 million (up 4.2%), $29.4 million (down 7.5%) and $183.2 million (up 26%), respectively.

Adjusted EBITDA margin in the Resources segment expanded 160 basis points (bps). The same declined 100 bps at Transportation, 90 bps at CMS and 70 bps at Financial Services.

Key Balance Sheet and Cash Flow Figures

IHS Markit ended the quarter with cash and cash equivalent balance of $133.2 million compared with $120 million in the prior quarter. Long-term debt was $5.1 billion compared with $4.9 billion in the previous quarter.

Cash flow from operations and free cash flow amounted to $188 million and $124.8 million, respectively, in the quarter. The company spent $63.2 million in capex.

Fiscal 2019 Outlook

IHS Markit reiterated its fiscal 2019 guidance. Revenues are expected in the range of $4.425 billion to $4.500 billion, including organic growth of 6% to 7% (including Ipreo). Adjusted EBITDA is expected in the range of $1.75 billion to $1.78 billion. Adjusted EPS is anticipated in the range of $2.52 to $2.57.

Zacks Rank and Other Key Picks

Currently, IHS Markit has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the broader Zacks Business Services sector are Copart CPRT, Booz Allen Hamilton BAH and Automatic Data Processing ADP, each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term expected EPS (three to five years) growth rate for Copart, Booz Allen and Automatic Data Processing is 20%, 14.6% and 13%, respectively.

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