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Why Is Broadridge Financial (BR) Down 19.4% Since Last Earnings Report?

Zacks Equity Research

A month has gone by since the last earnings report for Broadridge Financial Solutions (BR). Shares have lost about 19.4% 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 catalysts.

Broadridge Misses on Q2 Earnings and Revenue Estimates

Broadridge Financial Solutions reported dismal second-quarter fiscal 2020 results that missed the Zacks Consensus Estimate on both earnings and revenues.

Adjusted earnings of 53 cents per share missed the consensus estimate by 30% and were down 5% year over year. Total revenues of $969 million lagged the consensus mark by 3% but were up 2% year over year. The company generated closed sales of $45 million in the quarter, down 57% year over year.

Revenues in Detail

Revenues in the Investor Communication Solutions segment declined 2% from the year-ago quarter’s level to $716 million. Global Technology and Operations segment revenues came in at $281 million, up 14% from the year-ago quarter’s figure. The improvement was driven by acquisitions and organic growth. Recurring fee revenues of $648 million increased 7% from the year-ago quarter’s level.

Operating Results

Adjusted operating income of $94 million declined 7% year over year. Adjusted operating income margin declined to 9.7% from 10.6% in the prior-year quarter.

Balance Sheet and Cash Flow

Broadridge exited the second quarter with cash and cash equivalents of $234 million compared with $358.3 million at the end of the prior quarter. Long-term debt was $1.45 billion compared with $1.37 billion at the end of the prior quarter.

The company generated $97.9 million of cash in operating activities and capex was $17.5 million in the quarter. Broadridge paid out $61.8 million in dividends in the reported quarter.

Guidance

Broadridge reiterated fiscal year 2020 guidance expecting adjusted EPS at the low end of the range.

Total revenues are expected to grow 3-6%. Recurring fee revenue growth is anticipated in the range of 8-10%. Adjusted operating income margin is estimated to be approximately 18%. Closed sales are anticipated to be between $190 million and $230 million. Adjusted EPS growth is expected to be toward the lower end of the 8-12% range.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 5.83% due to these changes.

VGM Scores

At this time, Broadridge Financial has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, 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 B. 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 this revision looks promising. Notably, Broadridge Financial has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.



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