Sunny Future for Solera - Barron's

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Includes: ADP, SLH
by: Rachael Granby

On Wednesday, Solera Holdings (NYSE:SLH), the auto-insurance claims-processing unit that was once a part of Automatic Data Processing (NASDAQ:ADP), will release its fiscal fourth quarter numbers. Barron's Tiernan Ray sees plenty of potential.

Domestically, high gas prices have changed Americans' driving habits and some investors theorized that with fewer Americans driving, there would be fewer insurance claims filed. However, the subscription-based nature of the insurance contracts means Solera gets paid whether claims go up or down, and rising gas prices have not significantly hurt their bottom line. The U.S. market is maturing but provides stability, and there's still room for Solera to expand its market share.

Internationally, Solera's sales growth in Europe, the Middle East, and Africa is expected to be easily four times more than its 4% domestic growth. Auto ownership in these markets is growing rapidly, and Solera is in a good position to capture a signifcant piece of this growth.

Goldman Sachs analyst Peter Appert expects strong quarterly results, with profits of $0.10/share on revenue of $137.25M. His one-year target price is $32.

SunTrust Robinson Humphrey analyst Andrew Jeffrey, who also has a Buy rating on the stock, puts the one-year target price at $36 and sees 10% long-term revenue growth.

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Solera is a top-five holding of mutual fund TFS Market Neutral, which boasts a 2.8% YTD return and garners five stars from Morningstar.

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