Nielsen Holdings N.V. (NLSN) reported adjusted third-quarter 2014 earnings of 66 cents per share which increased from 50 cents in the year-ago quarter on the back of higher revenues and margin expansion. The Zacks Consensus Estimate was pegged at 62 cents.
Quarter Details
Although Nielsen’s revenues of $1.57 billion were up 13.3% on a year-over-year basis, it missed the Zacks Consensus Estimate of $1.59 billion. Excluding the impact of Arbitron and Harris acquisitions, revenues for the quarter were up 2.5%.
The year-over-year increase in revenues was primarily attributable to the Arbitron and Harris acquisition, which drove 28.8% and 3.5% revenue growth in the Watch and Buy segments, respectively.
Coming to operational metrics, Nielsen reported gross margins of 58.8% compared with 58.7% in the year-ago quarter. In dollar terms, gross profit increased 13.5% year over year to $924 million primarily due to higher revenue base.
Nielsen reported operating expenses of $613 million, up 7.4% from the year-ago quarter. Nevertheless, as a percentage of revenues, operating expenses were down 218 basis points (bps). This benefited Nielsen’s operating profit which increased 27.9% from the year-ago quarter to $311 million, while margins rose 226 bps.
The company reported adjusted net income of $256 million, up from $193 million reported in the year-ago quarter.
Nielsen exited the third quarter with cash balance of approximately $369 million versus $310 million in the last quarter. Gross debt was $6,251 million versus $6,692 million in the previous quarter.
Cash flow from operations increased to $392 million from $210 million in the previous quarter. Capital expenditure for the quarter came in at $103 million. The company reported free cash flow of $289 million.
Nielsen authorized a new share buy back plan of $1 billion, in addition to the $400 million buyback plan authorized in Jul 2013.
Our Take
The company’s third-quarter results improved year over year. The company's product launches such as TV/social media report are progressing well and will drive revenues in the near term. Nevertheless, continued investments in technology and infrastructure could weigh on margins in the near term.
Currently, Nielsen has a Zacks Rank #4 (Sell).
However, investors could consider better-ranked stocks such as Marvell Technology Group (MRVL), SunEdison (SUNE) and Paychex (PAYX), all of which sport a Zacks Rank #1 (Strong Buy).
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