Broadridge Financial Solutions (BR) is a provider of technology solutions including investor communications, securities processing and operations to banks, broker-dealers, mutual funds, and corporate issuers globally.
It is the former Brokerage Services division of ADP and was spun-off from ADP in 2007. The company has seen a compounded annual fee growth of 6% since it was spun-off.
BR processes 85% of all outstanding shares voted in the US and 72% of shares voted outside of the US.
Solid Third Quarter Results
Broadridge reported financial results for the first quarter of its fiscal year 2014 on November 7, 2013. Total Revenues increased 10% to $545 million from $496 million, primarily due to growth in net new business and by internal growth.
Non-GAAP Diluted earnings increased 117% to $0.39 per share, substantially ahead of the Zacks Consensus Estimate of $0.20 per share.
The management reaffirmed their full year guidance provided in August 2013--total revenue growth in the range of 2% to 4% and diluted earnings per share in the range of $2.00 to $2.10.
Earnings Estimates Revisions
After excellent results and reaffirmation of guidance, analysts have increased their estimates for BR.
Zacks Consensus Estimate for the current and next fiscal year are now at $2.29 per share and $2.47 per share respectively, up from $2.06 per share and $2.26 per share, 60 days ago. Rising estimates sent BR to Zacks Rank # 1 (Strong Buy) on November 14, 2013.
Shareholder Value Creation
The company plans to pay out 40% of its net earnings in dividends. It also plans using its excess cash for buybacks. Since its inception in 2007, the company has returned over $800 million of capital to its shareholders via dividends and buybacks.
BR is a Zacks Rank #1 (Strong Buy) stock. It also has a longer-term Zacks recommendation of “Outperform”. Further Zacks Industry Rank of 31 out of 265 (top 12%) suggests strong chances of outperformance in the coming months.
With its leadership position in a number of attractive markets in the investor communications and securities processing space and a diversified revenue base across large financial institutions, the company should continue to reward its investors in the coming months.
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