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Why SS&C Technologies Stock Fell 16.8% in July

By Steve Symington – Aug 9, 2019 at 10:29AM

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The investment and financial services software specialist announced solid Q2 results but lowered its 2019 guidance. Here's what investors need to know now.

What happened

Shares of SS&C Technologies (SSNC 0.54%) declined 16.8% in July, according to data from S&P Global Market Intelligence, after the investment management software specialist reduced its full-year outlook despite posting strong second-quarter results. 

The stock was basically flat through the first several weeks of last month, then shares dropped more than 16% on July 30 after its quarterly update hit the wires. SS&C's headline numbers were solid by any measure; revenue increased 27.2% year over year to $1.156 billion, and its adjusted net income per share jumped almost 50% to $0.91. Both figures were near the midpoints of SS&C's own financial guidance ranges.

CEO Bill Stone also lauded its "strong business and market-leading products," adding that SS&C's management and sales force achieved profitable revenue growth, with EBITDA margins expanding more than 600 basis points year over year.

Tired older man in suit looking at a notebook computer.

Image source: Getty Images.

So what

However, during the subsequent call with analysts, Stone said SS&C is currently enduring a combination of lower trading volumes and a slower environment for mergers and acquisitions, as well as attrition affecting some of its recently acquired businesses.

As a result, SS&C told investors to expect 2019 revenue in the range of $4.571 billion to $4.631 billion (down from $4.675 billion to $4.765 billion previously), and adjusted net income of $947.5 million to $988.5 million (down from $993 million to $1.042 billion before).

The market understandably responded by driving SS&C shares down.

Now what

That said, just yesterday SS&C's board of directors authorized a new $500 million stock repurchase plan, indicating the company possibly believes the sell-off was overdone.

"This repurchase program demonstrates the board's confidence in our current and future prospects," Stone said. "We will opportunistically repurchase our stock, while maintaining ample liquidity to have the flexibility to support our growth."

Assuming SS&C's long-term growth trajectory remains intact, that might well prove to be an astute use of the its capital.

Steve Symington has no position in any of the stocks mentioned. The Motley Fool recommends SS&C Technologies Holdings. The Motley Fool has a disclosure policy.

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