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Broadridge Financial (BR) Up 11.9% Since Last Earnings Report: Can It Continue?

It has been about a month since the last earnings report for Broadridge Financial Solutions (BR). Shares have added about 11.9% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Broadridge Financial due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Broadridge Missess on Q1 Earnings

Broadridge Financial Solutions reported mixed first-quarter fiscal 2023 results, with earnings missing the Zacks Consensus Estimate but revenues beating the same.

Adjusted earnings of 84 cents per share missed the consensus mark by 3.5% and were down 21.5% year over year. Total revenues of $1.3 billion beat the consensus mark by 1.7% and were up 7.6% year over year.

Recurring revenues of $806 million increased 7% from the year-ago quarter’s level. The company generated closed sales of $29 million in the quarter, down 2% year over year.

Revenues by Segment

Revenues in the Investor Communication Solutions segment increased 8% from the year-ago quarter’s level to $921 million. Global Technology and Operations segment revenues came in at $363 million, up 7% from the year-ago quarter’s figure. The improvement was mainly driven by new sales and internal growth.

Operating Results

Adjusted operating income of $150 million decreased 15% year over year. Adjusted operating income margin of 11.7% decreased 310 basis points (bps) year over year.

Balance Sheet and Cash Flow

Broadridge exited the quarter with cash and cash equivalents of $227.1 million compared with $224.7 million at the end of the prior quarter. Long-term debt was $4.1 billion compared with $3.8 billion at the end of the previous quarter.

The company used $204.5 million of cash from operating activities and capex was $5.5 million in the quarter. Broadridge paid out $75 million in dividends in the reported quarter.

Fiscal 2023 Guidance

Broadridge expects recurring revenue growth of 6-9%. Adjusted earnings per share growth are expected to be 7-11%. Adjusted operating income margin is estimated to be up by around 50 bps. Closed sales are anticipated between $270 million and $310 million.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -7.12% due to these changes.

VGM Scores

At this time, Broadridge Financial has a subpar Growth Score of D, however its Momentum Score is doing a bit better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. 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, Broadridge Financial has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

Performance of an Industry Player

Broadridge Financial belongs to the Zacks Outsourcing industry. Another stock from the same industry, Automatic Data Processing (ADP), has gained 13.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2022.

ADP reported revenues of $4.22 billion in the last reported quarter, representing a year-over-year change of +10%. EPS of $1.86 for the same period compares with $1.65 a year ago.

ADP is expected to post earnings of $1.95 per share for the current quarter, representing a year-over-year change of +18.2%. Over the last 30 days, the Zacks Consensus Estimate remained unchanged.

The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for ADP. Also, the stock has a VGM Score of C.

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