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Revenues, Tax Cuts to Aid Verisk Analytics (VRSK) Q1 Earnings

Zacks Equity Research
Updated

Verisk Analytics, Inc. VRSK will report first-quarter 2018 results on May 1, after the bell.

We expect the company's results to be driven by strong organic growth, acquisitions and benefits from U.S. tax reforms.

In a year’s time, shares of Verisk Analytics have gained 28.2%, outperforming the industry’s 24.7% rally.

 

Here are the expectations in detail.

Solid Segmental Performance to Drive Top Line

The Zacks Consensus Estimate for first-quarter revenues is pegged at $565 million, reflecting an increase of 12.3% when compared with the year-ago quarter’s actual figure. This upside is likely to be driven by strength across the company’s two segments — Decision Analytics and Risk Assessment. In the last reported quarter, total revenues improved 12.7% on a year-over-year basis.

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Revenues at the Decision Analytics segment are expected to be driven by increase insurance, energy and specialized markets as well as financial services category revenues. While the insurance category is witnessing growth in repair cost estimating, claims analytics solutions and underwriting solutions, the energy category is banking on momentum in subscription business. The financial services category rides high on its analytical data warehousing products, media effectiveness solutions and share of wallet model algorithms.

The Zacks Consensus Estimate for the Decision Analytics segment revenues is pegged at $365 million, reflecting year-over-year growth of 16.6%. In the fourth quarter, revenues from this segment increased 16% year over year.

Risk Assessment revenues are likely to be driven by annual effective growth in 2017 invoices, new solutions in industry-standard insurance programs and increase in underwriting solutions subscription revenues. The Zacks Consensus Estimate for revenues from this segment is pegged at $201 million reflecting an year-over-year improvement of 6.3%. In the fourth quarter, this segment’s revenues increased 6.9% year over year.

Verisk Analytics, Inc. Revenue (TTM)

Verisk Analytics, Inc. Revenue (TTM) | Verisk Analytics, Inc. Quote

 

Bottom Line to be Driven by Organic Growth & Tax Cuts

The Zacks Consensus Estimate for first-quarter adjusted EPS is pegged at 92 cents, mirroring year-over-year growth of 24.3%. This significant increase in the metric is likely to be driven by robust organic growth and acquisitions.

Also, the Tax Cuts and Jobs Act that reduced corporate tax rates significantly from 35% to 21% is expected to benefit Verisk Analytics’ earnings in the to-be-reported quarter.

In the fourth quarter, adjusted EPS was $1.34, which improved 67.5% year over year.

Our Model Doesn’t Suggest a Beat

According to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Verisk Analytics has an Earnings ESP of 0.00% and a Zacks Rank #2, a combination that makes surprise prediction difficult.

Stocks to Consider

Here are some stocks from the broader Business Services sector that investors may consider, as our model shows that these have the right combination of elements to beat on earnings in first-quarter 2018:

Mastercard Incorporated MA has an Earnings ESP of +0.08% and a Zacks Rank #2. The company is slated to report quarterly numbers on May 2. You can see the complete list of today’s Zacks #1 Rank stocks here.

WEX Inc. WEX has an Earnings ESP of +1.61% and a Zacks Rank of 2. The company is slated to report quarterly results on May 3.

FLEETCOR Technologies, Inc. FLT has an Earnings ESP of +0.37% and a Zacks Rank #2. The company will report quarterly numbers on May 3.

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Verisk Analytics, Inc. (VRSK) : Free Stock Analysis Report
 
FleetCor Technologies, Inc. (FLT) : Free Stock Analysis Report
 
WEX Inc. (WEX) : Free Stock Analysis Report
 
Mastercard Incorporated (MA) : Free Stock Analysis Report
 
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Zacks Investment Research