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IHS Markit (INFO) Q4 Earnings Surpass Estimates, Revenue Lag

Zacks Equity Research

IHS Markit Ltd. INFO reported mixed fourth-quarter fiscal 2018 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings per share of 57 cents beat the consensus mark by 2 cents and increased 10% on a year-over-year basis. Total revenues came in at $1.07 billion, missing the consensus mark of $1.08 billion but improving 13% from the year-ago quarter. Results were driven by continued focus on operational execution.

We observe that shares of IHS Markit have gained 3.7% over the past year, outperforming 0.5% rally of the industry it belongs to.

Segmental Revenues

Revenues at the Resources segment totaled $222.7 million, up 3% year over year, with recurring revenues rising 4% organically. The Transportation segment experienced year-over-year revenue growth of 11% to reach $297.3 million. Recurring revenues at this segment grew 10% organically.

Revenues at the CMS segment amounted to $139 million, down 1% year over year, with 2% organic growth in recurring revenues. Financial services segment’s revenues increased 27% year over year to $408.8 million with recurring revenues increasing 7% organically.

Revenues by Transaction Type

Recurring fixed revenues of $762.4 million rose 15% year over year on a reported basis and 6% on an organic basis. Recurring variable revenues grew 18% year over year on a reported basis and 3% organically to $138.5 million. Non-recurring revenues totaled $166.9 million, up 2% year over year on a reported basis and 1% on an organic basis.

IHS Markit Ltd. Revenue (TTM)

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

Operating Performance

Adjusted EBITDA of $417 million increased 14% from the year-ago quarter. Adjusted EBITDA margin improved 40 basis points (bps) year over year to 39.1%.

Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDA was $98.9 million (up 7.4% year-over-year), $116.8 million (up 5.6%), $35.4 million (up 7.9%) and $179.4 million (up 21.5%), respectively.

Adjusted EBITDA margin expanded 210 bps and 180 bps at CMS and Resources segments respectively. The same declined 210 bps at Transportation as well as Financial Services segments.

Key Balance Sheet and Cash Flow Figures

IHS Markit ended the quarter with cash and cash equivalent balance of $120 million compared with $154.4 million in the prior quarter. Long-term debt was $4.9 billion, roughly flat sequentially.

Cash flow from operations and free cash flow amounted to $357.5 million and $303.3 million, respectively, in the quarter. The company spent $54.2 million in capex.

Fiscal 2019 Outlook

IHS Markit provided 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 & Stocks to Consider

Currently, IHS Markit carries a Zacks Rank #4 (Sell).

A few better-ranked stocks in the Zacks Business Services sector are General Finance Corporation GFN, Information Services Group, Inc. III and Paychex, Inc. PAYX, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected EPS (three to five years) growth rate for General Finance, Information Services and Paychex is 11%, 14%, and 8.8%, respectively.

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