Dun & Bradstreet (DNB) Beats On Q3 Earnings, Raises Guidance

The Dun & Bradstreet Corporation (NYSE:DNB) reported third-quarter 2017 results wherein adjusted earnings of $1.79 per share easily beat the Zacks Consensus Estimate of $1.58. On a year-over-year basis, non-GAAP earnings were flat.

On an adjusted basis and after including forex effect, total revenue came in at $430 million, up 4% year over year. On a GAAP basis revenues were $428.3 million, up 4%. The Zacks Consensus Estimate was pegged at $429.3 million.

Quarter Details

Organic revenues came in at $413.8 million, up 2% (before effects of forex) year over year. Adjusted deferred revenues remained flat year over year.

Region-wise, adjusted revenues (and after including forex effect) from the company’s Americas segment were up 4% year over year to $353.7 million while that from Non-Americas increased 3% to $76.3 million.

Segment-wise, on an adjusted basis and after including forex effect, Risk Management Solutions revenues from Americas were flat year over year at $202.6 million. Nonetheless, Sales and Marketing Solutions revenues from the region grew 12% from the year-ago quarter to $151.1 million.

In the Non-Americas, adjusted Risk Management Solutions revenues were flat year over year at $60.2 million. Sales and Marketing Solutions Non-Americas however grew 16% from the year-ago quarter to $16.1 million.

Margins

On an adjusted basis, total operating costs were down 4% to $316.8 million. Adjusted total operating income was $113.2 million, up 6% year over year.

Balance Sheet & Cash Flow

Dun & Bradstreet ended the quarter with $431 million in cash and cash equivalents and long-term debt of $1.65 billion. The company’s net debt position as of Sep 30, 2017 was $1.25 billion.

For the first nine months of the year, cash flow from operating activities was $252.3 million while free cash flow was $203.4 million, down 12% year over year.

Outlook

For 2017, management expects adjusted earnings per share to be down in the range of 1-4% compared with earlier projected range of 4-7%. Adjusted revenues are however expected to increase in the band of 3-5% (before forex effect).

Organic revenues are likely to increase in the band of 1–3% (before forex effect). Adjusted operating income is projected to rise in the range of 1–3%, up from earlier guided range of 0 to 2%.

Free cash flow will be in the bracket of $215-$245 million (excluding any regulatory fines impact from China operations).

Our Take

We continue to expect that Dun & Bradstreet will benefit from its high-margin business model and strong product portfolio. Its partnerships with big players have also helped it to bring many more customers into its fold. Plus, the company is also well positioned to gain from its strategic acquisitions and alliances. The company’s focus on expanding analytics capabilities is also a positive. Cost savings resulted in a strong operating margin performance in the last reported quarter.

However, stiff competition, weak DNBi business and high debt continue to remain areas of concerns.

Zacks Rank & Share Price Movement

Dun & Bradstreet carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of Dun & Bradstreet have underperformed the industry in the last year. The company’s shares have decreased 2.5% against the industry’s gain of 17.6%.

Stocks to Consider

A few top-ranked stocks in the broader technology sector are NVIDIA Corporation (NASDAQ:NVDA) Applied Materials (NASDAQ:AMAT) , and Jabil Inc (NYSE:JBL) . While NVIDIA Corp and Jabil sport a Rank #1, Applied Materials has a Zacks Rank #2 (Buy).

Long-term earnings growth rate for NVIDIA, Applied Materials and Jabil is currently projected to be 11.2%, 17.1% and 12%, respectively.

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