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Why Is Verisk (VRSK) Down 0.3% Since Last Earnings Report?

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It has been about a month since the last earnings report for Verisk Analytics (VRSK). Shares have lost about 0.3% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Verisk due for a breakout? 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.

Verisk Surpasses Q3 Earnings & Revenues Estimates

Verisk Analytics reported solid third-quarter 2020 results, with earnings and revenues surpassing the Zacks Consensus Estimate.

Adjusted earnings per share of $1.32 beat the consensus mark by 9.1% and rose 17.9% on a year-over-year basis. The upside can be attributed to cost discipline in the business, coronavirus-led reduction in travel expenses and lower average share count

Revenues of $702.7 million beat the consensus estimate by 1.5% and increased 7.6% year over year on a reported basis and 3.6% on an organic constant-currency (cc) basis.

Segmental Performance

Insurance segment revenues totaled $498.6 million, up 6.3% year over year on a reported basis and 5.2% in organic cc.

Within the segment, underwriting and rating revenues of $347.9 million rose 11.3% on a reported basis and 6.5% in organic cc. The upside was primarily driven by an annual increase in prices derived from the 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. These increases were partially offset by a decrease in certain transactional revenues.

Claims revenues amounted to $150.7 million, declining 3.8% on a reported basis but improving 2.5% in organic cc. The top line was negativelyimpacted by the injunction ruling against roof-measurement solutions and decline in certain transactional revenues in connection with the COVID-19 pandemic.

Energy and Specialized Markets segment revenues of $163.8 million increased 16.7% year over year on a reported basis but declined 1% in organic cc. The uptick can be attributed tocontributions from the Genscape acquisition, environmental health and safety-service solutions, core research, and weather-analytics solutions. These were partially offset by declines in cost-intelligence solutions' implementation projects, which did not reoccur, and consulting revenues in connection with the COVID-19 pandemic.

Financial Services segment revenues of $40.3 million declined 7.1% year over year on a reported basis but improved 1.6% in organic cc. The segment was impacted by declines in the company’s spend informed analytic solutions arising from the COVID-19 pandemic and the recent dispositions.

Operating Results

Adjusted EBITDA of $366.2 million increased 18.4% on a reported basis and 14.8% onorganic cc. Adjusted EBITDA margin came in at 52.1% compared with 47.4% in the prior-year quarter.

Balance Sheet and Cash Flow

Verisk exited third-quarter 2020 with cash and cash equivalents of $309.4 million compared with $204.4 million at the end of the prior quarter. Long-term debt was $2.69 billion compared with $2.65 billion at the end of the prior quarter.

The company generated $207.1 million of cash from operating activities and capex was $65 million. Free cash flow was $142.3 million.

Share Repurchases & Dividend Payout

The company paid out a cash dividend of 27 cents per share on Sep 30. On Oct 28, the company's board of directors approved a quarterly cash dividend of 27 cents, payable on Dec 31, to shareholders of record as of Dec 15.

Including the accelerated share repurchase settled in the third quarter of 2020, the company repurchased nearly 0.3 million shares at an average price of $180.97, for a total cost of $50 million. As of Sep 30, 2020, the company had $329 million available under its share repurchase authorization.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Verisk has an average Growth Score of C, however its Momentum Score is doing a lot 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.

Outlook

Estimates have been broadly 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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