While most companies are just now reporting their Q1 2006 earnings, the (fiscal) year has already come to a close for data collator Acxiom (NASDAQ:ACXM). The company reports its fiscal Q4 and full-year 2006 numbers tomorrow after close of market. Here's what you need to know to put them in context.
What analysts say:
- Buy, sell, or waffle? Nine analysts follow Acxiom, with two rating it a buy and the other seven a hold.
- Revenues. Wall Street will be looking for 8% sales growth tomorrow, and $347.7 million in total revenue.
- Earnings. Meanwhile, profits are expected to surge 56% to $0.25 per share.
What management says:
Aside from some reshuffling of its board of directors seats, Acxiom hasn't said anything of real importance since we last heard from it on earnings back in January. What they said back then, though, is worth revisiting today.
You may recall that in justifying rejecting a buyout offer from ValueAct Capital, Acxiom said in December that it was about to report estimates that would "exceed consensus analysts' estimates." Talk about understatement -- a month later, Acxiom reported not the $0.25 per share that Wall Street expected, but $0.31, a full 24% better. "Company Leader" Charles Morgan characterized this feat as "clear evidence of the growing momentum at Acxiom."
What management does:
Let's hope he's right, because with the exception of last quarter, Acxiom has been turning in some pretty anemic results of late. Rolling gross margins had been falling for three straight quarters, and rolling operating and net margins for four straight quarters. The December quarter's results astounded Wall Street not just with the size of the profits, but because they were a reversal of the recent trend.
|
Margins % |
9/04 |
12/04 |
3/05 |
6/05 |
9/05 |
12/05 |
|---|---|---|---|---|---|---|
|
Gross |
24.6 |
25.5 |
25.9 |
24.8 |
24.6 |
25.6 |
|
Op. |
10.9 |
10.9 |
9.9 |
8.8 |
7.6 |
8.4 |
|
Net |
6 |
6 |
5.7 |
5.1 |
4.1 |
4.3 |
One Fool says:
I'd like to take this opportunity to play devil's advocate on Acxiom. I've considered the company a great investment for some time now, based on its strong free cash flow. However, after last quarter's results, one reader pointed out a couple things that are disconcerting. Specifically, the fact that Acxiom has, in recent years, been entering into short-term capital leases of information assets that it uses in its business. Acxiom does not characterize these capital leases as capital expenditure, and mentions them in a special section called "supplemental cash flow information" in its cash flow statement. But when a company spends money on something that it uses for cash generation, the expense should be deducted from operating cash flow when calculating free cash flow (money that is "free" to be spent on dividends, share buybacks, etc., and is not needed to run the business).
Mind you, I haven't made up my mind on this issue yet. But it's now on my radar, and I intend to keep Fool readers abreast of the issue. I should also note that I invited Acxiom's Investor Relations Coordinator to give the company's position on this issue back in January, suggesting that it might explain the function of the capital leases and how they affect true free cash flow a bit better in future earnings releases.
I received no response.
Competitors:
- Perot Systems (NYSE:PER)
- InfoUSA (NASDAQ:IUSA)
- IBM (NYSE:IBM)
- Equifax (NYSE:EFX)
- EDS (NYSE:EDS)
- Computer Sciences (NYSE:CSC)
Fool contributor Rich Smith does not own shares of any company named above.
