Dun & Bradstreet (DNB) Q2 Earnings Beat, Revenues Miss

The Dun & Bradstreet Corporation (NYSE:DNB) reported mixed second-quarter 2017 results wherein adjusted earnings of $1.40 per share easily beat the Zacks Consensus Estimate of $1.16 but revenues of $405.7 million fell short of the consensus mark of $411.1 million.

On a year-over-year basis, the metrics registered growth of 2.2% and 1.7%, respectively.

Quarter Details

On an adjusted basis and after including forex effect, total revenue came in at $408.4 million, up 2.3% year over year. Adjusted deferred revenue was up 3% after including forex effect.

Organic revenues came in at $392.5 million, almost flat year over year.

Region-wise, adjusted revenues from the company’s Americas segment were up 2% year over year to $336.8 million while that from Non-Americas increased 3% to $71.6 million.

Segment-wise, on an adjusted basis and after including forex effect, Risk Management Solutions revenues from Americas was down 1% year over year to $183.3 million. Sales and Marketing Solutions revenues from the region grew 6% from the year-ago quarter to $153.5 million.

In Non-Americas, adjusted Risk Management Solutions revenues declined 2% year over year to $57.3 million. Sales and Marketing Solutions Non-Americas grew 23% from the year-ago quarter to $14.3 million.

Margins

On an adjusted basis, total operating costs were down 2% to $318.2 million. Adjusted total operating income was $90.2 million, up 3.8% year over year.

Balance Sheet & Cash Flow

Dun & Bradstreet ended the quarter with $400.2 million in cash and cash equivalents and long-term debt of $1.673 billion. The company’s net debt position as of Jun 30, 2017 was $1.3 billion.

Cash flow from operating activities was $176.5 million year-to-date while free cash flow was $143.2 million, down 3.3% year over year.

Outlook

For 2017, management expects adjusted earnings per share to be down in the range of 4–7%. Adjusted revenues are 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 be in the range of 0–2%.

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

Our Take

Dun & Bradstreet is expected to benefit from its high-margin business model and strong product portfolio. Its partnerships with big players have also aided it bring more customers into the fold. Additionally, the company is also well-positioned to gain from its strategic acquisitions and alliances. The company’s focus on expanding analytics capabilities is another positive.

Though Dun & Bradstreet’s Americas business remains strong, the international business continues to be a drag on financials. A weak DNBi business and a high debt are the other areas of concerns. Moreover, intensifying competition remains a major concern.

Zacks Rank & Share Price Movement

Presently, Dun & Bradstreet carries a Zacks Rank #3 (Hold).

Shares of Dun & Bradstreet have underperformed the industry in the last year. The company’s shares have decreased 21.2% against the industry’s gain of 3.6%.

Stocks to Consider

Better-ranked stocks in the broader tech space are Cutera, Inc. (NASDAQ:CUTR) , Identiv, Inc. (NASDAQ:INVE) and United States Cellular Corp. (NYSE:USM) . All these three stocks sport a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank Stocks here.

In the trailing four quarters, Cutera, Identiv and United States Cellular delivered average positive earnings surprises of 231.25%, 51.41% and 37.84%, respectively.

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