Nielsen Holdings N.V. (NLSN) reported adjusted fourth-quarter 2014 earnings of 79 cents per share, which beat the Zacks Consensus Estimate of 75 cents. Adjusted earnings per share exclude one-time items but include stock-based compensation expenses.
Revenues
Nielsen reported revenues of $1.63 billion, up 3% sequentially and 1.4% from the year-ago quarter. The increase was driven by strength in Buy and Watch segments. However, revenues missed the Zacks Consensus Estimate of $1.65 billion.
Excluding the impact of the Arbitron and Harris acquisitions, revenues were up 0.1%. On a constant currency basis, revenues increased 4.4%.
Revenues by Segment
Buy business revenues were $908 million (55% of total revenue), up 0.6% year over year or 6.4% on a constant currency basis. The increase was driven by new client wins, growth in emerging markets and a modest rebound in discretionary spending.
Watch business revenues were $725 million (45% of total revenue), up 2.4% year over year or 4% on a constant currency basis. The increase was driven by continued strength in Audience Measurement, including Digital and marketing effectiveness.
Operating Results
Reported gross margin was 60%, up 130 basis points (bps) from the comparable year-ago quarter.
Nielsen reported total operating expenses of $672.0 million, down 5% from the year-ago figure of $707.0 million. As a percentage of sales, selling, general & administrative expenses decreased from the year-ago quarter, while depreciation & amortization expenses remained flat. This benefited Nielsen’s operating profit which increased 29.4% from the year-ago quarter to $308 million, while margins rose 410 bps.
Net Income
On a GAAP basis, Nielsen recorded a net profit of $161 million or 42 cents per share compared with $145 million or 38 per share a year ago.
On a non-GAAP basis, adjusted net profit per share came in at 79 cents as against 68 cents in the year-ago quarter.
Balance Sheet & Cash Flow
Nielsen exited the quarter with cash balance of approximately $273 million versus $369 million in the last quarter. Gross debt was $6,862 million versus $6,620 million in the prior quarter.
Net debt (gross debt excluding cash and cash equivalents) was $6,589 million and net debt leverage ratio was 3.59x at the end of the quarter.
Cash flow from operations increased to $401.0 million from $392.0 million in the last quarter. Capex was $138 million versus $103 million in the prior quarter. Free cash flow was $263 million versus $289 million in the third quarter.
Our Take
Nielsen Holdings is an information and measurement company which provides clients with media and marketing information about what consumers watch and buy on a global and local basis. The company’s fourth-quarter earnings beat the Zacks Consensus Estimate on the back of higher revenues and solid international growth.
The company's product launches such as TV/social media report are progressing well and should 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 #3 (Hold). Some better-ranked stocks that have been performing well include National Research Corp (NRCIB), The ADT Corporation (ADT) and IHS Inc. (IHS). While National Research sports a Zacks Rank #1 (Strong Buy), ADT and IHS have a Zacks Rank #2 (Buy).
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