Broadridge Financial Earnings: Modestly Soft Quarter, but Guidance Solid

Broadridge Financial Solutions BR reported a mixed end to its fiscal year. Fiscal fourth-quarter revenue of $1.84 billion was shy of the FactSet consensus estimate of $1.87 billion, while adjusted EPS of $3.21 came in 4% higher than the consensus estimate of $3.10. Closed sales also softened because of the selling environment. That said, the market appears happy with the firm’s initial fiscal 2024 outlook, which at the midpoint calls for adjusted EPS of $7.71; this compares favorably with the consensus estimate of $7.53. We will maintain our narrow moat rating and $185 fair value estimate.

Broadridge’s largest profit driver, in our view, is its governance franchise. Equity position growth was 6% for the quarter, a deceleration from 10% during the first nine months of fiscal 2023. Broadridge expects mid-single-digit growth in fiscal 2024. For the full year, equity position growth was 9%, with managed accounts growth faster than self-directed accounts. Fund position growth (mutual funds and exchange-traded funds) was 8%, in line with what we saw earlier in the company’s fiscal year. Growth in positions included both equity and fixed income; while passive fund growth outstripped active, active grew as well.

Customer communications revenue growth of 7% was solid, in our view, as we believe this segment is more competitive. Issuer solutions revenue growth slowed to 7%, but the fourth quarter tends to be larger and thus has a bigger base. Data-driven fund solutions growth of 11% looks strong on the surface, but this was driven entirely by higher interest rates benefiting float income.