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A month has gone by since the last earnings report for Verisk Analytics (VRSK). Shares have added about 3.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Verisk due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Verisk Beats Q2 Earnings Estimates, Revenues Lag
Verisk Analytics reported mixed second-quarter 2020 results, with earnings surpassing the Zacks Consensus Estimate but revenues missing the same.
Adjusted earnings per share of $1.29 beat the consensus mark by 9.3% and rose 17.3% on a year-over-year basis. The upside can be attributed to cost discipline in the business and lower average share count.
Revenues of $678.8 million missed the consensus estimate by 0.7% but increased 4% year over year on a reported basis and 1.1% on an organic constant-currency (cc) basis.
Insurance segment revenues totaled $486.4 million, up 3.3% year over year on a reported basis and 2.5% in organic cc.
Within the segment, underwriting and rating revenues of $343.5 million rose 9.1% on a reported basis and 5.1% in organic cc. The upside was primarily driven by an annual increase in prices derived from the continued enhancements of the solutions’ contents within the industry-standard insurance programs, sale of expanded solutions to existing customers in commercial and personal lines, and contributions from catastrophe-modeling services. These increases were partially offset by a decrease in certain transactional revenues.
Claims revenues amounted to $142.9 million, declining 8.6% on a reported basis and 2.9% in organic cc. The top line was negativelyimpacted by the injunction ruling against roof-measurement solutions and decline in certain transactional revenues in connection with the COVID-19 pandemic.
Energy and Specialized Markets segment revenues of $154.4 million increased 12.4% year over year on a reported basis but declined 2.8% in organic cc. The uptick can be attributed tocontributions from Genscape acquisition, environmental health and safety-service solutions, core research, and weather-analytics solutions. These were partially offset by declines in cost-intelligence solutions' implementation projects, which did not reoccur, and consulting revenues in connection with the COVID-19 pandemic.
Financial Services segment revenues of $38 million declined 14.1% year over year on a reported basis and 2.7% in organic cc, owing to the impact of the COVID-19 pandemic and the recent dispositions.
Adjusted EBITDA of $348.3 million increased 14.5% on a reported basis and 12.4% in organic cc. Adjusted EBITDA margin came in at 51.3% compared with 46.6% in the prior-year quarter.
Balance Sheet and Cash Flow
Verisk exited second-quarter 2020 with cash and cash equivalents of $309.4 million compared with $204.4 million at the end of the prior quarter. Long-term debt was $2.69 billion compared with $2.65 billion at the end of the prior quarter.
The company generated $249.5 million of cash from operating activities and capex was $56.7 million. Free cash flow was $192.8 million.
Share Repurchases & Dividend Payout
During the reported quarter, Verisk returned $218 million to shareholders through dividend payouts and repurchases
During the second quarter, the company repurchased nearly 0.5 million shares at an average price of $152.59 for a total cost of $75 million. As of Jun 30, the company had $379 million available under its share-repurchase authorization.
The company paid out a cash dividend of 27 cents per share on Jun 30. On Jul 29, the company's board of directors approved a quarterly cash dividend of 27 cents, payable on Sep 30, to shareholders of record as of Sep 15.
How Have Estimates Been Moving Since Then?
It turns out, estimates review have trended upward during the past month.
Currently, Verisk has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. 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 C. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Verisk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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