Company Reports

Broadridge reported a satisfactory fiscal third quarter. Recurring fee revenue growth decelerated to 4% during the period from 7% in the fiscal second quarter. It does, however, look like the firm saw some revenue move from the third quarter to the fourth quarter of fiscal 2024, which had a negative impact on recurring fee revenue by about 1-2 percentage points in the third quarter.

Broadridge Financial Solutions has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Its regulated proxy and interim business is its crown jewel, and a disproportionate amount of its net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volume.

Broadridge reported an OK fiscal second quarter ahead of its seasonally strong fiscal second half. Revenue of $1.41 billion and adjusted EPS of $0.92 compare modestly favorably with the FactSet consensus estimates of $1.40 billion and $0.89, respectively. The market is reacting negatively to the firm’s results, which we attribute to healthy valuation going into the quarter and modestly lower expectations for equity position growth. Broadridge maintained its fiscal 2024 outlook for firmwide recurring revenue growth, operating margins, earnings per share, and closed sales but provided updates to more granular aspects. We will maintain our narrow moat rating and $190 fair value estimate on Broadridge’s shares.

Broadridge started its fiscal 2024 on solid footing. Revenues in the firm’s seasonally soft fiscal quarter of $1.43 billion and adjusted EPS of $1.09 edged out the FactSet consensus estimates of $1.39 billion and $0.97 respectively. As is often the case during first quarter earnings, Broadridge reaffirmed its fiscal-year outlook. Overall, there was little in Broadridge’s earnings release that would alter our long-term view of the firm, and we will maintain our fair value estimate of $190 on Broadridge’s shares. Broadridge’s steady performance amid an uncertain macroeconomic backdrop and topsy-turvy market movement support our Morningstar Uncertainty Rating of Low.

Broadridge Financial Solutions has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Its regulated proxy and interim business is its crown jewel, and a disproportionate amount of its net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volume.

Broadridge Financial Solutions 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 Financial Solutions has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Its regulated proxy and interim business is its crown jewel, and a disproportionate amount of its net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volume.

Broadridge’s fiscal third quarter highlighted the firm’s resilience amid an uncertain backdrop in the financial services industry. Revenue of $1.65 billion in the quarter was in line with the FactSet consensus estimate, while adjusted EPS of $2.05 came in slightly ahead of the $2.02 consensus estimate. Broadridge now expects its constant currency recurring revenue growth to come in at the high end of its 6%-9% range while it expects its closed sales to come in near the low end of its $270 million-$310 million range. Broadridge is seeing some elongated sales cycles, particularly in Europe. Given sales commentary for asset manager end markets from firms such as MSCI, FactSet, and S&P Global, this development is not very surprising. Overall, there was little in Broadridge’s financial results that would alter our long-term view of the firm, and we will maintain our fair value estimate of $185 and narrow moat rating. Shares are trading roughly 7 percentage points ahead of the Morningstar US Market Index, which we attribute to investors being relieved that Broadridge is steady amid market turmoil.

Broadridge has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Broadridge’s regulated proxy and interim business is its crown jewel, and a disproportionate amount of the firm’s net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations or GTO segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volumes.

Narrow-moat Broadridge reported an OK second quarter. Adjusted EPS of $0.91 was essentially in line with the FactSet consensus estimate of $0.90, but revenue of $1.29 billion missed the consensus of $1.35 billion. We attribute the miss to lower event-driven mutual fund revenue, which can be hard to predict, and lower license revenue in wealth management. While management, perhaps to its detriment, classifies all global technology and operations segment as recurring, some revenue is tied to volumes and there is a small amount of lumpy license revenue. Broadridge maintained its fiscal 2023 guidance and position growth remains mostly healthy. Overall, we are not too concerned with the revenue miss, and there was little in Broadridge’s earnings report that would alter our long-term view of the firm. We will maintain our $185 per share fair value estimate.

Narrow-moat Broadridge reported a decent start to its fiscal year. Fiscal first-quarter revenue of $1.28 billion came in above the FactSet consensus of $1.26 billion while adjusted EPS of $0.84 missed the consensus expectation of $0.88. While the market seems to be punishing Broadridge's shares for the modest EPS miss, there was little in Broadridge's fiscal first-quarter earnings release that would alter our long-term view of the firm, and we will maintain our fair value estimate of $185 on Broadridge's shares. As is often the case following its seasonally soft fiscal first quarter, Broadridge maintained its full-year guidance.

On Tuesday, Spruce Point Capital Management published a short report taking a multi-pronged approach to suggest that Broadridge is highly overvalued and should trade 65%-75% lower than the current stock price. The stock fell on the open and finished the trading day down 0.31% versus a 2.11% increase to the Morningstar U.S. Equity Market index. Though the report highlights a few concerns we believe are valid, such as the high amount of expense capitalization and purchase price of Itiviti, we believe that the thrust of Spruce Point Capital's thesis lacks merit. We will maintain our fair value estimate of $185 on Broadridge's shares and narrow moat rating. We regard Broadridge's shares as about 20% undervalued. That said, with the current market downturn, we believe there are many other stocks that offer a more favorable risk-reward profile.

Broadridge has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Broadridge’s regulated proxy and interim business is its crown jewel, and a disproportionate amount of the firm’s net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations or GTO segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volumes.

Broadridge finished its fiscal year on a high note, which showcases its robust business model amid a more volatile macroeconomic environment. We are encouraged that Broadridge’s growth is coming from a multitude of factors. The core governance franchise remains strong despite a recently volatile market. Broadridge expects fiscal 2023 recurring revenue growth of 6%-9%, which implies $3.97 billion-$4.09 billion of revenue and compares favorably with our forecast of $3.94 billion. The firm’s outlook of adjusted EPS growth of 7%-11% implies adjusted EPS of $6.91-$7.17 and beat the FactSet consensus of $6.96 at the midpoint. We will maintain our narrow moat rating but expect to increase our fair value estimate by a single-digit percentage as we tweak our revenue forecasts higher.

Broadridge has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Broadridge’s regulated proxy and interim business is its crown jewel, and a disproportionate amount of the firm’s net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations or GTO segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volumes.

Broadridge reported a solid fiscal third quarter. Revenue of $1.53 billion was essentially in line with the FactSet consensus estimate of $1.54 billion and adjusted earnings per share of $1.93 beat consensus by $0.15 as operating expenses were lower than consensus expectations. Broadridge did nudge its adjusted EPS outlook higher but left its other guidance unchanged. Overall, there was little in the earnings release that would alter our long-term view of the firm, and we will maintain our narrow moat rating and $175 fair value estimate.

Broadridge reported a solid fiscal second quarter with revenue of $1.26 billion and adjusted EPS of $0.82. Broadridge’s revenue was 4% ahead of the FactSet consensus while adjusted EPS was in line. Broadridge now expects fiscal 2022 recurring revenue growth to come in at the high-end of its previous 12%-15% range. Adjusted operating margin is now expected to be 18.5%, down from 19.0% but the vast majority of this decline is optics in our view as the guide down is due to higher distribution (pass-through) revenue. Broadridge maintained its adjusted EPS and closed sales outlook. We believe shares are trading lower on the firm’s margin guidance and that the market is overreacting. We will maintain our narrow moat rating and fair value estimate of $175.

After doing a deep dive into narrow-moat-rated Broadridge Financial Solutions as well as updating our model, we are increasing our fair value estimate to $175 per share from $158 as we tweak our revenue and operating income forecasts higher. Broadridge’s regulatory communications business, which consists of equity proxy deliveries and mutual fund and exchange-traded fund interim communications, constitutes a disproportionate share of the firm’s adjusted net income. We believe that the rise of the retail investor and direct indexing are secular trends that will support position growth in the years ahead.

Broadridge has been the dominant proxy and interim service provider for broker/dealers for more than 20 years. Broadridge’s regulated proxy and interim business is its crown jewel, and a disproportionate amount of the firm’s net income comes from its fiscal third and fourth quarter during proxy season. In addition, Broadridge generates about 30% of its fee revenue and profit from its global technology and operations or GTO segment, which provides securities processing solutions. Amid COVID-19, Broadridge has benefited from higher engagement of retail investors through higher position growth and elevated trading volumes.

Broadridge reported a decent start to its fiscal year. Total revenue of $1.19 billion edged out the FactSet consensus of $1.15 billion. The beat was largely driven by ICS segment revenue with strength in both position growth and event-driven revenue. Global Technology and Operations was a bit soft on an organic basis on lower license and consulting revenue, but we don’t view this quarter’s softness as indicative of a longer-term trend. Broadridge’s adjusted operating margin of 14.8% was unchanged from the year-ago period. As is often the case during its first quarter earnings call, Broadridge reaffirmed its full-year guidance. Overall, there was little in the firm’s first-quarter financial results that would alter our long-term view on narrow-moat rated Broadridge, and we will maintain our $158 fair value estimate.