Verisk Analytics, Inc. (Nasdaq:VRSK), a leading data analytics provider, announced Total revenue increased 17.5% in second-quarter 2015 compared with second-quarter 2014.  Organic revenue growth was 9.4%, net of recent acquisitions and previously discussed Verisk Health pass-through revenue in both periods. Healthcare and financial services solutions led the organic revenue growth in the quarter.

  • Total revenue grew 17.5%; organic revenue growth was 9.4%, excluding recent acquisitions and pass-through Verisk Health revenue
  • Income from continuing operations grew 85.4% to $163.3 million; Adjusted EBITDA, which excludes non-recurring gains and expenses from the Wood Mackenzie transaction, grew 22.3% to $237.6 million
  • Diluted GAAP EPS grew 86.5% to $0.97; diluted adjusted EPS, excluding non-recurring items related to the Wood Mackenzie acquisition, increased 35.1% to $0.77
  • Net cash provided by operating activities less capital expenditures grew 40.0% year-to-date and 35.6% excluding recent acquisitions
  • Closed acquisition of Wood Mackenzie on May 19 for net cash purchase price of $2.8 billion, excluding hedge gains; completed $500 million accelerated share repurchase

Decision Analytics segment revenue grew 24.6% in the second quarter of 2015 and represented approximately 65.5% of total revenue. Decision Analytics organic revenue growth, net of recent acquisitions and Verisk Health pass-through revenue in both periods, was 11.6%.

  • Insurance category revenue increased 8.1%, led by strong growth in underwriting solutions.
  • Financial services category revenue increased 20.8%, driven by continued strong demand for our solutions and services.
  • Healthcare revenue growth, net of Verisk Health pass-through revenue in both periods, was 19.6%. Revenue and quality solutions led the growth in the quarter. Healthcare category revenue growth as reported was 6.1%.
  • Energy and specialized markets category organic revenue grew 6.0%. Including the recently acquired Wood Mackenzie and Maplecroft businesses, growth was 198.6%.

Scott Stephenson, president and chief executive officer, said, “Our second-quarter results were excellent, with organic revenue growth contributions and strong profitability across the company. We closed the acquisition of Wood Mackenzie, and we are even more excited about the opportunities now that the WoodMac team is part of the Verisk family. We believe that the WoodMac acquisition is a continuation of our commitment to smart capital deployment on behalf of our shareholders.”

Verisk Analytics Q2 2015Source: Verisk Earnings Release

Analyst Opinion: In a report published recently UBS analyst Alex Kramm downgraded the rating on Verisk Analytics, Inc. (NASDAQ: VRSK) from Neutral to Sell, while lowering the price target from $79 to $74. The stock appears overvalued at present, especially given the expectations of potential headwinds for the company in the next few quarters.

“A softening underlying insurance industry, incremental consolidation in the end market, and VRSK’s expansion into the energy vertical all represent new uncertainties to investors that could put pressure on the shares,” Kramm explained.

The analyst believes that the company is facing tough comps, and that organic growth and other optics are likely to weaken from the elevated levels seen in recent times. Also, while Verisk Analytics continues to have a high quality business, the deteriorating health of the insurance end market could lead to pressure on the stock.

According to the UBS report, “Consolidation has picked up with 3 large deals announced in the past month and a half, and we do not see any signs of M&A activity slowing down. As competitive pressures and spending potential in VRSK’s core underlying market heat up, we would not be surprised to see organic growth rates take a hit.”

The analyst also expressed concern regarding the timing of the WoodMac acquisition, given that the energy market appears to be under pressure. “The acquisition also came at a full price, for a division that we note will likely grow at a slower rate than other DA segments,” Kramm added.

Source:  Seeking Alpha