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Jack Henry (JKHY) Up 3.1% Since Last Earnings Report: Can It Continue?

Zacks Equity Research

It has been about a month since the last earnings report for Jack Henry (JKHY). Shares have added about 3.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Jack Henry due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Jack Henry's Q1 Earnings Beat, Revenues Up Y/Y

Jack Henry & Associates reported first-quarter fiscal 2020 earnings of $1.16 per share, which surpassed the Zacks Consensus Estimate by 12 cents and surged 7.4% from the year-ago quarter.

Revenues improved 12% year over year to $438 million. The figure also outpaced the Zacks Consensus Estimate of $421 million.

Further, the company’s non-GAAP revenues came in $420.7 million, up 9.4% year over year.

The top line was driven by solid performance of core and payments segments during the reported quarter. Additionally, accelerating processing, and services and support revenues contributed to the results.

We believe Jack Henry’s continued core customer wins and robust new payment platform will instill investor optimism in the stock.

Segments in Detail

Core: The company generated $155.9 million revenues from this segment (35.6% of total revenues), improved 12% year over year.

Payments: This segment yielded $149.7 million revenues (34.2% of total revenues), climbing 12% from the year-ago quarter.

Complementary: This segment generated $117.2 million revenues (26.7% of total revenues), increasing 11% year over year.

Corporate & Other: The company generated $15.2 million revenues from this segment (3.5% of total revenues), surging 12% from the prior-year quarter.

Operating Details

In first-quarter fiscal 2020, total operating expenses were $319.8 million, reflecting an increase of 10.5% year over year. This can primarily be attributed to rising headcounts, which led to an increase in personnel costs and salaries. Further, surge in selling, general and administrative expenses added to expenses.

As a percentage of revenues, operating expenses contracted 60 bps year over year to 73.1%.

Per the company reported, operating margin was 27%, expanding 100 bps year over year.

Balance Sheet & Cash Flow

As of Sep 30, 2018, cash and cash equivalents totaled $96.7 million, which improved from $93.6 million as of Jun 30, 2018.

Trade receivables were nearly $234.4 million, down from $310.1 million in the previous quarter.

Further, the company generated $123.1 million of cash from operations in fiscal first quarter.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

VGM Scores

Currently, Jack Henry has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions has been net zero. Notably, Jack Henry has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.



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