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Why Is Verisk (VRSK) Up 16.9% Since Last Earnings Report?

·4 min read

It has been about a month since the last earnings report for Verisk Analytics (VRSK). Shares have added about 16.9% in that time frame, outperforming 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 catalysts.

Verisk Q4 Earnings Surpass Estimates, Revenues Lag

Verisk Analytics reported mixed fourth-quarter 2021 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.

Adjusted earnings per share of $1.47 outpaced the consensus mark by 5.8% and grew 15.8% on a year-over-year basis. The upside was backed by organic growth within the business, and lower interest expenses, effective tax rate and average share count.

Revenues of $766 million missed the consensus estimate by 0.3% but increased 7.4% year over year on a reported basis and 5.2% on an organic constant-currency (cc) basis.

Segmental Performance

Insurance segment revenues totaled $563.4 million, up 9% year over year on a reported basis and 6.4% on an organic cc basis.

Within the segment, underwriting and rating revenues of $399.1 million rose 10.8% on a reported basis and 7.2% on an organic cc basis. The upside was primarily driven by an annual increase in prices derived from 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 and international software solutions.

Claims revenues amounted to $164.3 million, improving 4.8% on a reported basis and 4.4% on an organic cc basis. The top line was positivelyimpacted by repair cost estimating solutions revenues and claims analytics revenues.

Energy and Specialized Markets segment revenues of $164.5 million increased 3.9% year over year on a reported basis and 2.8% on an organic cc basis. The uptick can be attributed tocontributions from core research solutions, and environmental health and safety service revenues.

Financial Services segment revenues of $38.1 million grew 0.1% year over year on a reported basis as well as on an organic cc basis. The segment was backed by growth in the company’s spend informed analytics revenues. This was partially offset by projects that did not reoccur and lower bankruptcy volumes.

Operating Results

Adjusted EBITDA of $375 million increased 9% on a reported basis and 7.6% on an organic cc basis. Adjusted EBITDA margin rose to 49% from 48.2% in the prior-year quarter.

Balance Sheet and Cash Flow

Verisk exited fourth-quarter 2021 with cash and cash equivalents of $280.3 million compared with $218.8 million at the end of the prior-year quarter. Long-term debt was $2.34 billion compared with $2.69 billion at the end of prior-year quarter.

Verisk generated $188.6 million of cash from operating activities and capex was $61.4 million. Free cash flow was $103.3 million.

Share Repurchases & Dividend Payout

Verisk paid out a cash dividend of 29 cents per share on Dec 31. On Feb 16, 2022, the company's board of directors approved a dividend hike of 6.9%, thereby raising the quarterly cash dividend from 29 cents per share to 31 cents per share. The raised dividend will be paid on Mar 31, 2022, to shareholders of record as of Mar 15, 2022.

During the reported quarter, the company repurchased almost 352,000 shares at an average price of $212.82 per share, for a total cost of $75.0 million. As of Dec 31, 2021, the company had $603.8 million available under its share repurchase authorization. On Feb 16, 2022, the company's board of directors has approved an additional authorization of $1.0 billion.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates flatlined during the past month.

VGM Scores

At this time, Verisk has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

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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