It has been about a month since the last earnings report for IHS Markit (INFO). Shares have added about 6.6% in that time frame, outperforming 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 its most recent earnings report in order to get a better handle on the important drivers.
IHS Markit Q1 Earnings Beat Estimates
IHS Markit reported mixed first-quarter fiscal 2019 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.
Adjusted earnings per share of 60 cents beat the consensus mark by 3 cents and increased 13% on a year-over-year basis. Total revenues came in at $1.05 billion, missing the consensus mark of $1.06 billion but improving 12% from the year-ago quarter.
Revenues at the Resources segment totaled $216.8 million, up 6% year over year, with recurring revenues rising 5% organically. The Transportation segment experienced year-over-year revenue growth of 7% to reach $288.1 million. Recurring revenues at this segment grew 9% organically.
Revenues at the CMS segment amounted to $132.3 million, down 4% year over year, with no organic growth in recurring revenues. Financial services segment’s revenues increased 28% year over year to $409.2 million with recurring revenues increasing 6% organically.
Revenues by Transaction Type
Recurring fixed revenues of $767.2 million rose 12% year over year on a reported basis and 5% on an organic basis. Recurring variable revenues grew 16% year over year on a reported basis and 3% organically to $136 million. Non-recurring revenues totaled $143.2 million, up 9% year over year on a reported basis and 8% on an organic basis.
Adjusted EBITDA of $408.1 million increased 14% from the year-ago quarter. Adjusted EBITDA margin improved 40 basis points (bps) year over year to 39%.
Segment-wise, Resources, Transportation, CMS and Financial Services adjusted EBITDA was $93.2 million (up 9.8% year-over-year), $114.3 million (up 4.2%), $29.4 million (down 7.5%) and $183.2 million (up 26%), respectively.
Adjusted EBITDA margin in the Resources segment expanded 160 basis points (bps). The same declined 100 bps at Transportation, 90 bps at CMS and 70 bps at Financial Services.
Key Balance Sheet and Cash Flow Figures
IHS Markit ended the quarter with cash and cash equivalent balance of $133.2 million compared with $120 million in the prior quarter. Long-term debt was $5.1 billion compared with $4.9 billion in the previous quarter.
Cash flow from operations and free cash flow amounted to $188 million and $124.8 million, respectively, in the quarter. The company spent $63.2 million in capex.
Fiscal 2019 Outlook
IHS Markit reiterated its 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.
Currently, IHS Markit has a subpar Growth Score of D, a grade with the same score on the momentum front. Following the exact same course, 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 F. 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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