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Why Is Broadridge Financial (BR) Down 4% Since Last Earnings Report?

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A month has gone by since the last earnings report for Broadridge Financial Solutions (BR). Shares have lost about 4% in that time frame, underperforming the S&P 500.

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

Broadridge Q3 Earnings Beat, Raises 2021 Outlook

Broadridge Financial Solutions  reported better-than-expected third-quarter fiscal 2021 results.

Adjusted earnings (excluded 36 cents from non-recurring items) of $1.76 per share, surpassed the Zacks Consensus Estimate by 5.4% and increased 5% on a year-over-year basis.

Total revenues of $1.39 billion also beat the consensus mark by 8.3% and rose 11% year over year. Recurring fee revenues increased 8% on a year-over-year basis to $900 million. The company generated closed sales of $46 million in the quarter, up 3% year over year.

Revenues by Segment

Revenues in the Investor Communication Solutions segment increased 13.2% from the year-ago quarter's level to $1,109.3 million. The segment’s recurring fee revenues were up 11% to $586 million. Event-driven fee revenues increased 89% to $74 million. Distribution revenues increased 9% to $449 million.

Global Technology and Operations segment's recurring fee revenues came in at $314 million, up 3% year over year. This improvement was driven by net new business. Internal growth was impacted by higher equity trading volumes.

Operating Results

Adjusted operating income of $284 million rose 8% year over year. Adjusted operating income margin decreased to 20.4% from 21% in the prior-year quarter.

Balance Sheet and Cash Flow

Broadridge exited the quarter with cash and cash equivalents of $355.8 million compared with the $365.6 million witnessed at the end of the prior quarter. Long-term debt was $1.74 billion compared with $1.8 billion in the previous quarter.

The company generated $106.2 million of cash in operating activities and capex was $11.4 million in the quarter. Broadridge paid out $66.6 million in dividends in the reported quarter.

Riased Fiscal 2021 Guidance

Broadridge expects total revenue growth in the range of 8-10% (previous guidance: 1-4%).

Recurring revenue growth of 8-10% (previous guidance: 3-6%).

Adjusted EPS growth is expected to be 11% to 13% (previous guidance: 6% to 10%).

Adjusted operating income margin is estimated to be up by around 18% (kept unchanged from previous guidance). Closed sales are anticipated to be between $190 million and $235 million (kept unchanged from  previous guidance).

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, Broadridge Financial has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 upward for the stock, and the magnitude of these revisions looks promising. Notably, Broadridge Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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