What Happened
Broadridge Financial Solutions (BR 0.86%) experienced a 12.9% decline in its stock price in January, according to S&P Global Market Intelligence.
The fintech fell short of the S&P 500, which was down 5.3% in January. As of Feb. 7, the share price was down about 18% to around $149 per share.
Image source: Getty Images.
So what
Broadridge Financial is the leading provider of investor communication materials, producing things like proxy statements, prospectuses, annual reports, and other documents that companies produce for shareholders. This business, called Investor Communication Solutions, generates about 71% of the company's revenue, and most of this income is recurring fee-based revenue. Companies are mandated by the Securities and Exchange Commission to provide these services, so it's a sturdy business for Broadridge.
Plus, it enjoys a high retention rate, as customers required to produce these for investors -- whether it is from a mutual fund, exchange-traded fund, or individual stock portfolio -- are reluctant to change providers due to the costs and complexities of doing so. In addition, as the market leader, Broadridge benefits from its scale, pricing power, and customer loyalty.
That said, the stock was down in January, but it was more reflective of the correction that took place among growth stocks as its price-to-earnings had soared to nearly 40 at the end of 2021.
Now what
Broadridge did bounce back at the end of the month on expectations of a solid earnings report on Feb. 1. Broadridge beat its fiscal second-quarter earnings for the period ended Dec. 31, with revenue up 19% year over year to $1.26 billion, adjusted operating income up 19% to $141 million, and adjusted earnings per share up 12% to $0.82. Adjusted earnings excludes certain expenses, like acquisitions costs, among others, and is viewed by company officials as the better gauge of operating performance.
Broadridge also has a global technology and operations business, through which it provides trading, settlement, reporting, and back-office solutions for capital markets and wealth and investment management firms. This business saw a 30% revenue boost to $371 million, buoyed in part by its acquisition of Itiviti Holding AB last year, which strengthens its capabilities and expands its footprint to Europe and Asia.
In the second-quarter release, CEO Tim Gokey said the company was on track for annual revenue and earnings-per-share gains in the range of 11% to 15%. While debt and expenses are up from recent acquisitions, Broadridge remains in a good spot given its market-leading status and sturdy business model.
