On Jun 28, Zacks Investment Research downgraded Markit Ltd. MRKT to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Markit has been witnessing declining earnings estimates on the back of weak first-quarter 2016 results. This securities exchange reported earnings of 26 cents, missing the Zacks Consensus Estimate by 16.13%. Earnings also declined 21% year over year primarily due to higher expenses. Shares lost about 9% over the last six weeks following the underperformance.
With respect to the surprise trend, the company missed expectations in the last four quarters by average of 9.87%.
Operating expenses increased 9.3% owing to higher personnel costs and acquisitions. EBITDA margin contracted 150 basis points attributable to lower revenues in the Processing segment, and the dilutive impact of acquisitions in 2015.
Though revenues improved, adverse forex movement lowered revenue growth by 1.8% attributable to a stronger U.S. dollar against the sterling and the euro.
Cash generated from operations decreased 18% in the first quarter leading to a decline of about 39% in cash and cash equivalents.
For the second quarter, the company expects interest expense to be about $8.3 million, in line with the first-quarter level.
The Zacks Consensus Estimate moved down 5.2% to $1.27 per share for 2016 and 11.6% to $1.30 for 2017 in the last 60 days.
Stocks to Consider
Though we prefer to avoid Markit presently, stocks from the finance sector worth considering are Bats Global Markets BATS, Markel Corp. MKL and National General Holdings Corp NGHC. While Markel and National General sport a Zacks Rank #1 (Strong Buy), Bats Global Markets carries a Zacks Rank #2 (Buy).
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