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Broadridge (BR) Beats Q2 Earnings and Revenue Estimates


Broadridge Financial Solutions Inc. BR reported better-than-expected second-quarter fiscal 2018 results. Moreover, both revenues and earnings marked solid year-over-year improvement.

The company posted non-GAAP earnings of 79 cents per share (excluding acquisition and amortization related expenses), surpassing the Zacks Consensus Estimate of 58 cents. Also, quarterly earnings increased over twofold on a year-over-year basis.

Quarter Details

Broadridge’s fiscal second-quarter revenues of $1.013 billion increased 13.5% year over year. Moreover, it came ahead of the Zacks Consensus Estimate of $954 million. Better-than-expected revenues “from an elevated level of event-driven activity” were a catalyst.

Recurring fee revenues increased 5% during the quarter that included contribution from organic growth, Net New Business, internal growth and acquisition-related synergies. Event-driven fee revenues soared a whopping 227% to $97 million during the quarter, primarily due to higher proxy contest and mutual fund proxy activities. Distribution revenues during the quarter increased 7%, primarily due to favorable foreign-currency fluctuations.

Revenues from the Investor Communication Solutions segment (78% of total revenues) increased 13.9% from the year-ago quarter to $802.2 million. The improvement was attributable to higher recurring revenues from net new business, closed sales, elevated event-driven fee revenues, internal growth and acquisitions.

Global Technology and Operations segment (22% of total revenues) revenues came in at $228 million, reflecting an increase of 10.1% from the year-ago quarter. The increase was driven by higher Net New Business from closed sales, internal growth and recent acquisition.

Broadridge’s adjusted operating income margin expanded from 9.4% to 13.6%, primarily due to the higher recurring fee revenues and event-driven fee revenues. Selling, general and administrative expenses as a percentage of revenues contracted to 12.6% from 14.1% in the year-ago quarter. The company’s adjusted net income of $94.7 million or 79 cents was up from $46.8 million or 39 cents in the year-ago period.

The company exited the quarter with cash and cash equivalents of $366.5 million compared with $288.8 million in the previous quarter. Long-term debt on the balance sheet totaled $1.223 billion.

The company generated operating cash flow of $141.8 million during the first half of fiscal 2018. Free cash flow came in at $89.3 million in the period.

Broadridge Financial Solutions, Inc. Price and EPS Surprise

Revised Fiscal 2018 Guidance

Broadridge revised its 2018 outlook. The company now projects revenue growth in the range of 2-4% compared with the earlier guidance of 2-3%. Similarly, adjusted earnings are now projected to increase in the range of 27-31%, up from the previous expected range of 15-19%. Management also raised free cash flow guidance range to $500-$550 million of $400-$450 million.

The company reiterated its recurring revenue growth and adjusted operating margin guidance. Recurring revenue growth is expected in the range of 4-6%. Adjusted operating income margin is still estimated to be approximately 16%.

Bottom Line

Broadridge reported stellar fiscal second-quarter results, wherein the top and bottom lines surpassed the respective Zacks Consensus Estimate. Year-over-year comparisons on both the counts were favorable backed by higher recurring revenues, internal growth, contribution from Net New Business, increased distribution revenues and acquisition-related synergies.

We remain optimistic about Broadridge’s strategic acquisitions and product launches. We also believe the company’s close association with Accenture ACN will be beneficial over the long run.

However, competition from DST Systems Inc. DST and pricing pressure remain headwinds.

Broadridge carries a Zacks Rank #2 (Buy).

Another top-ranked stock in the broader technology sector is Micron Technology, Inc. MU, which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Micron Technology has an expected long-term EPS growth rate of 10%.

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