Earnings Preview: Broadridge - Analyst Blog
August 10 2011 - 5:30AM
Zacks
Broadridge Financial
Solutions Inc. (BR) is scheduled to announce its fourth
quarter fiscal 2011 results on August 11, 2011. There were no
changes in analysts’ estimates in recent months.
Third Quarter
Overview
Broadridge delivered decent third
quarter results, beating the Zacks Consensus Estimate on both the
top and bottom lines. The quarter’s adjusted earnings came in at 25
cents per share, which was 6 cents above of our expectation. The
quarter’s beat was attributed to higher recurring revenue,
partially offset by higher operating expenses and a higher tax
rate.
Broadridge reported a 38.4%
year-over-year increase in its quarterly revenue, aided by
recurring revenues from acquisitions. However, the improvement was
partially offset by lower contribution from event-driven mutual
fund proxy fee revenues. The Investor Communication Solutions
segment posted marginal growth due to dampening of event-driven
mutual fund proxy revenues. But the Securities Processing Solutions
segment showed decent growth on the strength in new business,
offset by the carryover impact of fiscal 2009 client losses and
price concessions.
Increased investment in
acquisitions, lower event-driven mutual fund proxy revenues and
higher operating expenses were responsible for the margin
contraction.
Full Year
Guidance
For fiscal 2011, Broadridge
reiterated its earnings guidance of $1.30 to $1.40 per share.
Management expects free cash flow (including costs related to the
Penson transaction and the International Business Machines
Inc. (IBM) data center services agreement) in the range of
$140.0 million to $200.0 million (previously $131.0–$189.0
million).
Agreement of
Analysts
Out of the four analysts providing
estimates for the fourth quarter and fiscal 2011, none revised
estimates in the last seven days. A similar situation was noticed
for fiscal 2012 and there were no changes to estimates since the
third quarter results.
The analysts expect continued
weakness in mutual fund event-driven revenue and associated
distribution revenue to lead to lower top-line generation for
Broadridge in the coming quarters.
Magnitude of Estimate
Revisions
Over the past ninety days, the
Zacks Consensus Estimate for the quarter was reduced by a penny to
91 cents. The Zacks Consensus Estimate increased 2 cents to $1.36
for fiscal 2011 and dropped 3 cents for fiscal 2012 in the same
time period.
Recommendation
We remain optimistic on
Broadridge’s strategic acquisitions and potential product launches.
But management’s commentary on lackluster event-driven mutual fund
proxy revenue keeps us cautious.
Some analysts are of the opinion
that Broadridge has a number of drivers that will benefit earnings
over the next two years. They find themselves confident on BR's
ability to earn roughly 30 cents per share in 2013 due to its
strategic initiatives. The analysts believe revenue could benefit
as the company's strategic acquisitions continue to do well.
Stiff competition from HD Supply,
DST Systems Inc. (DST) and State Street
Corp. (STT) is a concern.
Currently, Broadridge has a Zacks
#3 Rank, implying a short-term Hold recommendation.
BROADRIDGE FINL (BR): Free Stock Analysis Report
DST SYSTEMS (DST): Free Stock Analysis Report
INTL BUS MACH (IBM): Free Stock Analysis Report
STATE ST CORP (STT): Free Stock Analysis Report
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