Dun & Bradstreet (DNB) Q1 Earnings Top, Revenues Fall Shy

Dun & Bradstreet Corp. (NYSE:DNB) reported first-quarter 2016 adjusted earnings of $1.18 per share that easily beat the Zacks Consensus Estimate of 94 cents. However, quarterly revenues of $375 million fell tad short of the Zacks Consensus Estimate of $376.4 million.

On an adjusted basis, total revenue came in at $377.6 million, up 6% year over year. Revenues from the company’s Americas segment grew 10% year over year to $309.6 million while that from Non-Americas declined 10% to $68 million owing to adverse currency translations.

On an adjusted basis, Risk Management Solutions revenues from Americas increased 12% year over year to $179.9 million. Sales & Marketing Solutions revenues from the region also grew 7% from the year-ago quarter to $129.7 million.

In Non-Americas, adjusted Risk Management Solutions revenues declined 7% year over year to $56.6 million. Sales & Marketing Solutions Non-Americas fell 23% from the year-ago quarter to $11.4 million.

Margins

On an adjusted basis, total operating costs were up 9% to $304 million. Total operating income was $73.6 million, down 4% year over year.

Balance Sheet & Cash Flow

Dun & Bradstreet ended the quarter with $365.7 million in cash and cash equivalents, unchanged as of Dec 31, 2015. Long-term debt was $1.7 billion compared with $1.8 billion as of Dec 31, 2015. The company’s net debt position as of Mar 31, 2016 was $1.4 billion.

For the quarter, cash flow from operating activities was $130.5 million while free cash flow was $114.9 million, down 20% year over year due to higher payments related to restructuring activities.

Guidance

For 2016, the company expects revenues to grow in a band of 4% to 6% and adjusted operating income will either be flat or increase 4%. Adjusted EPS growth will range from negative 3% to positive 2%. Free cash flow (excludinglegacy tax matters and probable regulatory fines related to China operations, if any) is expected to be around $255 to $285 million.

Our Take

We believe that Dun & Bradstreet’s high-margin business model, strong international growth potential, strategic investments, partnerships, accretive cloud-based acquisitions and aggressive share buyback will drive growth.

Also, the company will be able to provide a wide range of products given its partnerships with the likes of Salesforce.com (NYSE:CRM) , Oracle Corp (NYSE:ORCL)., SugarCRM, Salesforce Wave analytics platform and Lattice Engines, which in turn will drive top-line growth.

Earlier, the company acquired NetProspex, a leading B2B professional contact data and data management services provider. This acquisition is likely to drive growth going forward.

However, increasing competition from companies such as FactSet Research Systems Inc. (NYSE:FDS) and Nielsen N.V. (NYSE:NLSN) will continue to hurt revenues and profitability in the near term. Moreover, a high debt level remains a concern.

Currently, Dun & Bradstreet has a Zacks Rank #2 (Buy).