Acxiom Corporation (ACXM) seems to be moving through a dynamic shift towards its core competency segments as desired by the new management team. However, a couple of existing downsides linger which make us reiterate our Neutral recommendation on its stock presently.
A decision had been taken with regard to steering the company’s focus towards its core competency areas previously. It is praiseworthy that Acxiom has already started implementing strategies addressing the company’s focus. Recently, the company sold off its background screening unit, Acxiom Information Security Services (:AISS) as a nascent step towards meeting that objective.
Acxiom posted an impressive outlook for its fourth quarter of fiscal 2012. Even though critics may contend that this move is too ambitious considering its low revenue yields in the third quarter of fiscal 2012, the company appears quite determined to grapple with such bottlenecks and emerge victorious against the clouded global fiscal scenario. Major product innovation strategies along with foreign market proliferation are perceived to be the growth drivers in the coming quarters by Acxiom.
One aspect which remains laudatory with regard to Acxiom is its constant endeavor to return optimum value to its shareholders. The company has already repurchased 4 million shares at nearly $43 million till now in its fiscal year 2012. Judging by its trend of serving its investors’ purpose, we can expect similar moves on the part of Acxiom to remain interminable with regard to returning share holder value in the coming quarters as well.
A major reason for our concern remains the clouded fiscal scenario prevalent in the world today. Acxiom remains quite vulnerable to factors such as unfavorable foreign exchange movements and inflationary pressures which can deteriorate its gains even if it performs well as a company. Hence, aspects such as cost margins, consumer prices etc. need to be dealt with solicitously, judging by the currently ailing macro conditions.
The database marketing and services are the core competency segments towards which businesses are currently being focused. It is to be noted that this emphasis demands heavy investments which can become quite an onus to the company’s earnings and margins which might turn out to be burdensome on consumer prices.
We recently observed quite a few management shifts at Acxiom. The first of these changes was the appointment of Scott Howe as the new CEO and President. Second, Warren Jenson was offered the position of Executive Vice President of the company. Such management churns can cloud the investors’ minds, thus undermining their confidence in the company’s future performance with so many changes in the top management.
The company faces ominous competition from players such as Fair Issac Corp. (FICO), Camelot Information Systems Inc. (CIS) and Epam Systems Inc. (EPAM). In the short-run we have a Zacks #4 Rank on the stock which translates into a short-term rating of Sell.
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