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Why Is Verisk (VRSK) Up 2.5% Since Last Earnings Report?

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  • VRSK

A month has gone by since the last earnings report for Verisk Analytics (VRSK). Shares have added about 2.5% 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 Q3 Earnings & Revenues Surpass Estimates

Verisk Analytics reported solid third-quarter 2021 results, with earnings and revenues beating the Zacks Consensus Estimate.

Adjusted earnings per share of $1.44 outpaced the consensus mark by 5.1% and grew 9.1% on a year-over-year basis. The upside was backed by organic growth within the business, lower interest expense, and lower average share count.

Revenues of $759 million beat the consensus estimate by 0.6% and increased 8% year over year on a reported basis and 5.1% on an organic constant-currency (cc) basis.

Segmental Performance

Insurance segment revenues totaled $557.9 million, up 10.6% year over year on a reported basis and 7.4% on an organic cc basis.

Within the segment, underwriting and rating revenues of $390.5 million rose 10.4% on a reported basis and 7% 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 $167.4 million, improving 11.1% on a reported basis and 8.2% 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 $165.9 million increased 5% year over year on a reported basis and 2.5% on an organic cc basis. The uptick can be attributed tocontributions from consulting, and environmental health and safety service revenues.

Financial Services segment revenues of $35.2 million declined 12.7% year over year on a reported basis and 13.5% on an organic cc basis. The segment was weighed down by certain contract transitions, projects that did not reoccur and lower bankruptcy volumes. These declines more than offset the solid growth in spend informed analytics revenues.

Operating Results

Adjusted EBITDA of $378.8 million increased 3.5% on a reported basis and 2.1% on an organic cc basis. Adjusted EBITDA margin fell to 49.9% from 52.1% in the prior-year quarter.

Cash Flow

Verisk generated $285.2 million of cash from operating activities and capex was $61.4 million. Free cash flow was $223.8 million.

Share Repurchases & Dividend Payout

Verisk paid out a cash dividend of 29 cents per share on Sep 30. On Oct 27, the company's board of directors approved a quarterly cash dividend of 29 cents, payable on Dec 31, 2021, to holders of record as of Dec 15, 2021.

During the reported quarter, the company repurchased almost 798,000 shares at an average price of $187.91 per share, for a total cost of $150 million. As of Sep 30, 2021, the company had $678.8 million available under its share repurchase authorization.

How Have Estimates Been Moving Since Then?

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

VGM Scores

At this time, Verisk has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, 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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