Why Is IHS Markit (INFO) Up 5% Since Last Earnings Report?

It has been about a month since the last earnings report for IHS Markit (INFO). Shares have added about 5% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is IHS Markit due for a pullback? 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.

IHS Markit Surpassess Q3 Earnings Estimates

IHS Markit reported mixed third-quarter fiscal 2019 results with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings per share of 67 cents beat the consensus mark by 4 cents and increased 16% on a year-over-year basis. Total revenues came in at $1.11 billion, missing the consensus mark by $17 million but improving 11% from the year-ago quarter.

Quarter Details

Revenues at the Resources segment totaled $230 million, up 9% year over year, with recurring revenues rising 5% organically. The Transportation segment experienced year-over-year revenue growth of 6% to reach $314.9 million. Recurring revenues at this segment grew 10% organically.

Revenues at the CMS segment amounted to $138.6 million, up 1% year over year, with no organic growth in recurring revenues. Financial services segment’s revenues increased 21% year over year to $428.8 million with 6% organic growth.

Recurring fixed revenues of $799.9 million rose 11% year over year on a reported basis and 7% on an organic basis. Recurring variable revenues of $144.4 million grew 16% year over year on a reported basis and 5% on an organic basis. Non-recurring revenues totaled $168 million, up 6% year over year on a reported basis and 4% on an organic basis.

Adjusted EBITDA of $452.9 million increased 16% from the year-ago quarter. Adjusted EBITDA margin improved 170 points (bps) year over year to 40.7%.

IHS Markit ended the quarter with cash and cash equivalent balance of $124.1 million compared with $109.5 million in the prior quarter. Long-term debt was $5.05 billion compared with $4.9 billion in the previous quarter.

Cash flow from operations and free cash flow amounted to $412.9 million and $342.9 million, respectively, in the quarter. CapEx was $70 million. The company repurchased $200 million of shares in the quarter.

Fiscal 2019 Outlook

IHS Markit expects revenues in the range of $4.40 billion to $4.42 billion, including organic growth of 5% to 6% (including Ipreo). Adjusted EBITDA is expected in the range of $1.75 billion to $1.78 billion. Adjusted EPS is anticipated in the range of $2.52 to $2.57.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.58% due to these changes.

VGM Scores

Currently, IHS Markit has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, 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 downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, IHS Markit has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.