A month has gone by since the last earnings report for Verisk Analytics (VRSK). Shares have added about 5.3% 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 its most recent earnings report in order to get a better handle on the important catalysts.
Verisk Lags Q2 Earnings Estimates, Revenues Beat
Verisk Analytics reported mixed second-quarter 2019 results, wherein the company’s earnings lagged the Zacks Consensus Estimate but revenues surpassed the same.
Adjusted earnings per share of $1.10 missed the consensus mark by a penny but improved 4.8% on a year-over-year basis. The company’s bottom line benefited fromorganic growth, contributions from acquisitions, decrease in interest expense and lower average share count, which were partially offset by the timing of the incremental stock-based compensation, rise in depreciation and amortization expense, and a higher effective tax rate.
Revenues of $652.6 million beat the consensus estimate by $7.6 million and improved 8.5% year over year on a reported basis and 7.2% on an organic constant-currency (cc) basis.
Insurance segment revenues totaled $468.5 million, up 9.1% year over year on a reported basis and 7.8% at organic cc. Within the segment, underwriting and rating revenues of $312.3 million rose 8.1% on a reported basis and 7.1% at organic cc. The improvement was primarily driven by increases in industry-standard insurance programs, property-specific underwriting and catastrophe modeling solutions revenues. Claims revenues amounted to $156.2 million, which improved 11.2% on a reported basis and 9% at organic cc. The uptick can be attributed to revenues from repair cost estimating, claims analytics and remote imagery solutions.
Energy and Specialized Markets segment revenues amounted to $139.8 million and improved 7.6% year over year on a reported basis and 5.5% at organic cc. The improvement can also be attributed to revenues from market and cost intelligence solutions and core research.
Financial Services segment revenues of $44.3 million improved 5.5% year over year on a reported basis and 6.1% at organic cc. Strength in spend-informed analytics solutions and portfolio management boosted the segment.
Adjusted EBITDA of $304.1 million increased 5.7% on a reported basis and 5.2% at organic cc. Adjusted EBITDA margin was 46.6% compared with 47.8% in the prior-year quarter. Adjusted EBITDA expenses (cost of revenues; selling, general and administrative expenses; investment income and others) increased 11.1% to $348.5 million. Operating income in the second quarter was $218.3 million compared with $212.3 million in the prior-year quarter. Operating margin was 33.5% compared with 35.3% in the year-ago quarter.
Balance Sheet and Cash Flow
Verisk exited second-quarter 2019 with cash and cash equivalents of $153.3 million compared with $179.5 million at the end of the prior quarter. Long-term debt came in at $2.45 billion compared with $2.44 billion at the end of the previous quarter. The company generated $200.3 million of cash from operating activities and spent $46.9 million on capex. Free cash flow was $153.4 million.
Share Repurchases & Dividend Payout
During the second quarter of 2019, through an accelerated share repurchase (ASR) agreement, Verisk repurchased roughly 361,000 shares at an average price of $138.32 for a total cost of $50 million. The company also entered into an additional $75 million ASR agreement. The associated shares will be delivered and settled in the third quarter of 2019. As of Jun 30, 2019, the company had $303 million under its share repurchase authorization. The company paid out a cash dividend of 25 cents per share on Jun 28. On Jul 24, the company's board of directors approved a cash dividend of 25 cents per share to be paid out on Sep 30 to shareholders of record as of Sep 13.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in fresh estimates.
At this time, Verisk has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions has been net zero. 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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