A month has gone by since the last earnings report for IHS Markit (INFO). Shares have added about 4.4% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is IHS Markit 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.
IHS Markit Q4 Earnings Beat, Revenues Miss Estimates
IHS Markit reported mixed fourth-quarter fiscal 2018 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.
Adjusted earnings per share of 57 cents beat the consensus mark by 2 cents and increased 10% on a year-over-year basis. Total revenues came in at $1.07 billion, missing the consensus mark of $1.08 billion but improving 13% from the year-ago quarter. Results were driven by continued focus on operational execution.
Revenues at the Resources segment totaled $222.7 million, up 3% year over year, with recurring revenues rising 4% organically. The Transportation segment experienced year-over-year revenue growth of 11% to reach $297.3 million. Recurring revenues at this segment grew 10% organically. Revenues at the CMS segment amounted to $139 million, down 1% year over year, with 2% organic growth in recurring revenues. Financial services segment’s revenues increased 27% year over year to $408.8 million with recurring revenues increasing 7% organically.
Revenues by Transaction Type
Recurring fixed revenues of $762.4 million rose 15% year over year on a reported basis and 6% on an organic basis. Recurring variable revenues grew 18% year over year on a reported basis and 3% organically to $138.5 million. Non-recurring revenues totaled $166.9 million, up 2% year over year on a reported basis and 1% on an organic basis.
Adjusted EBITDA of $417 million increased 14% from the year-ago quarter. Adjusted EBITDA margin improved 40 basis points (bps) year over year to 39.1%. Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDA was $98.9 million (up 7.4% year-over-year), $116.8 million (up 5.6%), $35.4 million (up 7.9%) and $179.4 million (up 21.5%), respectively. Adjusted EBITDA margin expanded 210 bps and 180 bps at CMS and Resources segments respectively. The same declined 210 bps at Transportation as well as Financial Services segments.
Key Balance Sheet and Cash Flow Figures
IHS Markit ended the quarter with cash and cash equivalent balance of $120 million compared with $154.4 million in the prior quarter. Long-term debt was $4.9 billion, roughly flat sequentially. Cash flow from operations and free cash flow amounted to $357.5 million and $303.3 million, respectively, in the quarter. The company spent $54.2 million in capex.
Fiscal 2019 Outlook
IHS Markit provided fiscal 2019 guidance. Revenues are expected in the range of $4.425 billion to $4.500 billion, including organic growth of 6% to 7% (including Ipreo). Adjusted EBITDA is expected in the range of $1.75 billion to $1.78 billion. Adjusted EPS is anticipated in the range of $2.52 to $2.57.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
At this time, IHS Markit 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 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 downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, IHS Markit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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