Broadridge (BR) Misses Earnings and Revenue Estimates in Q2

Broadridge Financial Solutions, Inc. BR reported dismal second-quarter fiscal 2020 results that missed the Zacks Consensus Estimate on both earnings and revenues.

Adjusted earnings of 53 cents per share missed the consensus estimate by 30% and were down 5% year over year. Total revenues of $969 million lagged the consensus mark by 3% but were up 2% year over year. The company generated closed sales of $45 million in the quarter, down 57% year over year.

Shares of the company have gained 28.4% over the past year, outperforming the 22.7% rally of the industry it belongs to.

Let’s check out the numbers in detail.

Revenues in Detail

Revenues in the Investor Communication Solutions segment declined 2% from the year-ago quarter’s level to $716 million. Global Technology and Operations segment revenues came in at $281 million, up 14% from the year-ago quarter’s figure. The improvement was driven by acquisitions and organic growth. Recurring fee revenues of $648 million increased 7% from the year-ago quarter’s level.

Operating Results

Adjusted operating income of $94 million declined 7% year over year. Adjusted operating income margin declined to 9.7% from 10.6% in the prior-year quarter.

Balance Sheet and Cash Flow

Broadridge exited the second quarter with cash and cash equivalents of $234 million compared with $358.3 million at the end of the prior quarter. Long-term debt was $1.45 billion compared with $1.37 billion at the end of the prior quarter.

The company generated $97.9 million of cash in operating activities and capex was $17.5 million in the quarter. Broadridge paid out $61.8 million in dividends in the reported quarter.

Guidance

Broadridge reiterated fiscal year 2020 guidance expecting adjusted EPS at the low end of the range.

Total revenues are expected to grow 3-6%. Recurring fee revenue growth is anticipated in the range of 8-10%. Adjusted operating income margin is estimated to be approximately 18%. Closed sales are anticipated to be between $190 million and $230 million. Adjusted EPS growth is expected to be toward the lower end of the 8-12% range.

Zacks Rank & Upcoming Releases

Broadridge currently carries a Zacks Rank #2 (Buy).

Some other top-ranked stocks in the broader Zacks Business Services sector are Waste Management WM, S&P Global SPGI and Fidelity National Information Services FIS, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings (three to five years) growth rate for Waste Management, S&P Global and Fidelity National Information Services is estimated at 8.2%, 10% and 8.9%, respectively.

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