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Nielsen (NLSN) Q3 Earnings Improve Y/Y, Revenues In Line

Nielsen Holdings plc NLSN reported third-quarter 2017 diluted net earnings of 41 cents per share, increasing 13.9% year over year.

Also, shares of Nielsen have lost approximately 2.0% year to date, underperforming the industry’s gain of 25.1%.

Revenues

Reported revenues came in at $1.641 billion, increasing 4.5% year over year. The increase was driven by recent contribution from the acquisition of Gracenote, continued strength in the company’s Watch segment, and growth in emerging markets, partially offset by weakness in the U.S. Buy segment.

On a constant-currency basis, revenues increased 3.6%.

However, revenues were more or less in line with the Zacks Consensus Estimate of $1.639 billion.

Revenues by Segment

Watch business revenues were $838 million (51% of total third quarter revenue), reflecting an increase of 10.1% year over year or 9.7% on a constant-currency basis. The increase came on the back of continued strength in Audience Measurement and Marketing Effectiveness, which improved 16.9% and 18.7%, respectively, on a constant-currency basis. Excluding the acquisition of Gracenote, Watch revenues increased 2.4% or 2.0% on a constant-currency basis.

Buy business revenues were $803 million (49% of total revenue), reflecting a decline of 0.7% year over year and 2.1% on a constant-currency basis. Excluding the foreign currency impact, revenues in the Developed market declined 5.1% on a constant-currency basis due to softness in the U.S. market. However, revenues from emerging markets were up 10.8% on a constant-currency basis, driven bycoverage expansion and broad product offerings.

Operating Results

Reported gross margin was 57.8%, down 130 basis points (bps) from the year-ago period.

Nielsen’s operating expenses, namely selling, general and administrative expenses of $445 million, decreased 1.5% from the year-ago figure of $452 million. Therefore, operating margin increased 160 bps year over year to 20.5%.

Adjusted EBITDA was $522 million in the third quarter, increasing 4.8% year over year or 4.0% on a constant currency basis.

Net Income

On a GAAP basis, Nielsen registered net profit of $146 million or 41 cents per share compared with $130 million or 36 cents in the year-ago quarter.

Balance Sheet & Cash Flow

Nielsen exited the quarter with cash balance of approximately $662 million compared with $510 million in the last quarter.

Net debt (gross debt excluding cash and cash equivalents) was $7.78 billion and net debt leverage ratio was 3.88x at the end of the quarter.

Cash flow from operations increased to $538 million in the third quarter from $226 million in the prior quarter and $456 million in the year-ago quarter. Capex was $113 million in the reported quarter. Free cash flow was $425 million in the third quarter against $162 million in the previous quarter and $353 million in the year-ago quarter.

Share Repurchase

Moreover, the company repurchased $33 million of shares during the third quarter of 2017. It has a total of $321 million remaining for repurchase under the existing share-repurchase program.

Outlook

For full-year 2017, management maintained its guidance. It expects total revenue growth on a constant-currency basis of 4%, adjusted EBITDA margin growth on a constant-currency basis of approximately 20bps and GAAP net income per share in the range of $1.40-$1.46. Also, free cash flow is expected to be approximately $900 million.

Nielsen N.V. Price, Consensus and EPS Surprise

 

Nielsen N.V. Price, Consensus and EPS Surprise | Nielsen N.V. Quote

Our Take

Nielsen Holdings is an information and measurement company which offers media and marketing information on what consumers watch and buy locally.

Continued share repurchase reflect Nielsen’s financial strength and commitment toward returning value to its shareholders. Also, the company's product launches are progressing well and should drive revenues in the near term.

However, continued investments in technology and infrastructure could weigh on margins and profitability, going forward.

Currently, Nielsen carries a Zacks Rank #3 (Hold). A few other better-ranked stocks in the broader technology sector are NVIDIA Corporation NVDA, sporting a Zacks Rank #1 (Strong Buy), while Applied Materials, Inc. AMAT and FactSet Research Systems Inc. FDS, carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings per share growth rate for Applied Materials, NVIDIA Corporation and FactSet Research Systems is projected to be 17.1%, 10.3% and 10.8%, respectively.

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