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Jack Henry (JKHY) Down 3% Since Last Earnings Report: Can It Rebound?

·4 min read

It has been about a month since the last earnings report for Jack Henry (JKHY). Shares have lost about 3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Jack Henry due for a breakout? 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 drivers.

Jack Henry's Q3 Earnings Beat

Jack Henry & Associates reported third-quarter fiscal 2021 earnings of 95 cents per share, which surpassed the Zacks Consensus Estimate by 10.5%. Further, the bottom line increased 1.1% sequentially but decreased 1% year over year.

Revenues improved 1% year over year and 2.7% sequentially to $433.8 million. However, the top line missed the Zacks Consensus Estimate of $436.6 million.

The company’s non-GAAP revenues were $429.41 million, up 6% from the year-ago quarter and 2.2% from the prior quarter.

Year-over-year revenue growth was driven by strength across the Payments and Complementary segments in the reported quarter. Additionally, accelerating processing revenues contributed to the results.

However, sluggishness in the Core and Corporate segments was concerning. Further, declining services and support revenues were overhangs.

Top Line in Detail

Services & Support: The company generated revenues of $254.64 million from the category (59% of revenues). Notably, the figure declined 6% from the year-ago quarter due to a decrease in hardware and deconversion fee revenues. Nevertheless, the company witnessed growth in data processing and hosting fees in the reported quarter.

Processing: The category yielded revenues of $179.14 million (41% of revenues) in the reported quarter, up 13% year over year. This can be attributed to growth in card processing transaction volumes. Also, increasing digital and remittance revenues contributed well.

Segments in Detail

Core: The company generated revenues of $135.15 million from the segment (31.2% of total revenues), decreasing 4% year over year.

Payments: The segment yielded revenues of $160.8million (37.1% of total revenues), increasing 7% from the year-ago quarter.

Complementary: The segment generated $125.4 million in revenues (28.9% of total revenues), increasing 1% year over year.

Corporate & Other: The company generated revenues of $12.4 million from the segment (2.8% of total revenues), down 11% from the prior-year quarter.

Operating Details

In third-quarter fiscal 2021, total operating expenses were $342.6million, reflecting ayear-over-year increase of 2%. This can primarily be attributed to higher personnel costs and rising expenses related to the company’s card processing platform.

As a percentage of revenues, the figure contracted 430 basis points year over year to 78.9%.

Notably, operating margin was 21% in the reported quarter, which remained flat on a year-over-year basis.

Balance Sheet

As of Mar 31, 2021, cash and cash equivalents totaled $70.1 million, which decreased from $147.8 million as of Dec 31, 2020.

Trade receivables were $207.7 million in the reported quarter, down from $212.9million in the previous quarter.

Further, the current and long-term debt stood at $200.2 million at the end of the fiscal third quarter compared with $266,000 at the end of second-quarter fiscal 2021.

Guidance

For fiscal 2021, the company’s projection for GAAP revenues changed from $1.76-$1.77 billion to$1.752-$1.757 billion. Further, the company’s expectation regarding non-GAAP revenues currently stands at$1.735-$1.74 billion. Previously, it expected $1.73-$1.74 billion.

Further, the company raised the earnings per share outlook for fiscal 2021 from $3.85-$3.90 to $3.98-$4.02.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month.

VGM Scores

At this time, Jack Henry has a subpar Growth Score of D, however its Momentum Score is doing a lot better with a B. However, 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 trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Jack Henry has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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