Dun & Bradstreet (DNB) Q3 Earnings Beat, Revenues Falter

Dun & Bradstreet Corp. (NYSE:DNB) reported third-quarter 2016 results wherein adjusted earnings of $1.79 per share easily beat the Zacks Consensus Estimate of $1.75 but revenues of $412.8 million missed the consensus mark of $423.8 million. On a year-over-year basis, earnings fell 2.7% but revenues grew 1.6%. The company reiterated its guidance for the current year.

Quarter Details

On an adjusted basis and after including forex effect, total revenue came in at $412.8 million, almost flat year over year. Revenues from the company’s Americas segment were up 1% year over year to $338.8 million while that from Non-Americas declined 5% to $74 million.

On an adjusted basis and after including forex effect, Risk Management Solutions revenues from Americas were up 2% year over year to $203.6 million. Sales & Marketing Solutions revenues from the region fell 1% from the year-ago quarter to $135.2 million.

In Non-Americas, adjusted Risk Management Solutions revenues declined 1% year over year to $60.3 million. Sales & Marketing Solutions Non-Americas fell 18% from the year-ago quarter to $13.7 million.

Margins

On an adjusted basis, total operating costs were up 1% to $305.5 million. Total operating income was $107.3 million, up 1% year over year.

Balance Sheet & Cash Flow

Dun & Bradstreet ended the quarter with $327.3 million in cash and cash equivalents and long-term debt of $1.6 billion. The company’s net debt position as of Sep 30, 2016 was $1.3 billion.

For the first nine months of the year, cash flow from operating activities was $280 million while free cash flow was $232.1 million, down 3% year over year.

Guidance

For 2016, the company continues to expect adjusted revenues to grow in a band of 4% to 6%. Adjusted operating income is now expected to grow in the range of 1% to 5%. Adjusted EPS is expected to be down 2% to up 3%. Free cash flow (excluding legacy tax matters and probable regulatory fines related to China operations, if any) is expected to be around $255 million to $285 million.

Our Take

We believe that Dun & Bradstreet’s high-margin business model, strategic investments, partnerships and accretive cloud-based acquisitions will drive growth. The company earlier divested its Latin American and Benelux region operations to its Worldwide Network partners. The sale of operations will be accretive to earnings and operating income in 2016 but adversely impact current year revenues by $6 million.

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

Though D&B’s Americas business remains strong, the international business continues to be a drag on financials. Weak DNBi business and high debt are other areas of concerns. Plus, 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 #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.

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