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Why Is Verisk (VRSK) Down 5.2% Since Last Earnings Report?

It has been about a month since the last earnings report for Verisk Analytics (VRSK). Shares have lost about 5.2% 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 catalysts.

Verisk's Q2 Earnings Beat Estimates

Verisk Analytics reported better-than-expected second-quarter 2022 results, wherein both earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings per share (excluding 29 cents from non-recurring items) of $1.53 beat the consensus mark by 7.8% and grew 30.8% on a year-over-year basis. The upside was backed by organic growth within the business, lower provision for income taxes, decreased interest expenses and a fall in average share count.

Revenues of $746.3 million beat the consensus estimate by 0.1% but decreased 0.2% year over year on a reported basis and 5.3% on an organic constant-currency (cc) basis. The decline in revenues was primarily due to the sale of environmental health and safety business (3E) and Verisk Financial Services.

Segmental Performance

Insurance segment revenues totaled $610 million, up 10.9% year over year on a reported basis and 6.4% on an organic cc basis.

Within the segment, underwriting and rating revenues of $437.8 million rose 12.8% on a reported basis and 7.1% on an organic cc basis. The upside was primarily driven by an annual increase in prices derived from the continued enhancements of the content of solutions within our industry-standard insurance programs as well as the sale of expanded solutions to the existing customers in commercial and personal lines. In addition, extreme event and life solutions  contributed to growth.

Claims revenues amounted to $172.2 million, improving 6.5% on a reported basis and 4.7% on an organic cc basis. The top line was primarily driven by claims analytics revenues and property estimating solutions.

The Energy and Specialized Markets segment’s revenues of $133.5 million decreased 17.7% year over year on a reported basis but increased 0.8% on an organic cc basis. The fall in revenues was primarily due to the sale of the 3E business that closed on Mar 11, 2022, and the suspension of commercial operations in Russia. However, organic cc growth was driven by modest growth in research revenues.

The Financial Services segment’s revenues of $2.8 million fell 92.1% year over year. Verisk had closed the sale of Verisk Financial Services on Apr 8, 2022.

Operating Results

Adjusted EBITDA of $380.8 million increased 2.7% on a reported basis and 4.4% on an organic cc basis. Adjusted EBITDA margin rose to 51% from 49.6% in the prior-year quarter.

Balance Sheet and Cash Flow

Verisk exited second-quarter 2022 with cash and cash equivalents of $480.7 million compared with $397.9 million at the end of the prior-year quarter. Long-term debt was $2.34 billion, flat with the prior-year quarter’s level.

Verisk generated $130.2 million of cash from operating activities while capex was $69.2 million. Free cash flow was $61 million.

Share Repurchase & Dividend Payout

During the June quarter, Verisk paid out a total cash dividend of $49.2 million.

In the reported quarter, VRSK bought back 1.6 million shares at an average price of $208.18 for a total cost of $325 million for the second quarter of 2022. As of Jun 30, 2022, VRSK had $707.5 million remaining under its share repurchase authorization.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Verisk has a subpar Growth Score of D, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Verisk has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Verisk belongs to the Zacks Business - Information Services industry. Another stock from the same industry, Nielsen Holdings Plc (NLSN), has gained 17.3% over the past month. More than a month has passed since the company reported results for the quarter ended June 2022.

Nielsen Holdings Plc reported revenues of $882 million in the last reported quarter, representing a year-over-year change of +2.4%. EPS of $0.46 for the same period compares with $0.43 a year ago.

For the current quarter, Nielsen Holdings Plc is expected to post earnings of $0.48 per share, indicating a change of +6.7% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.

Nielsen Holdings Plc has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of B.


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