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Why Is MSCI (MSCI) Up 5.1% Since Last Earnings Report?
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A month has gone by since the last earnings report for MSCI (MSCI - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MSCI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MSCI second-quarter 2024 adjusted earnings of $3.64 per share beat the Zacks Consensus Estimate by 2.25% and increased 11.7% year over year.
Revenues increased 14% year over year to $708 million, beating the consensus mark by 1.48%. Organic revenues increased 9.7% year over year.
Recurring subscriptions of $521.5 million increased 14.4% year over year and contributed 73.7% to revenues.
Asset-based fees of $163.3 million increased 18.2% year over year and contributed 23.1% to revenues.
Non-recurring revenues of $23.2 million fell 15% year over year and contributed 3.3% to revenues.
At the end of the reported quarter, average assets under management (AUM) were $1.631 trillion in ETFs linked to MSCI indexes.
The total retention rate was 94.8% in the quarter under review.
Top-Line Details
In the second quarter, Index revenues of $397.2 million surpassed the Zacks Consensus Estimate by 7.21% and increased 9.6% year over year. Recurring subscriptions and asset-based fees increased 8.1% and 18.2% on a year-over-year basis, respectively. Non-recurring revenues declined 28% year over year. Organically, Index operating revenue growth was 9.8%.
Growth in Index revenues included $0.18 million from the acquisition of Foxberry. The uptick in recurring subscription revenues was primarily driven by strong growth from market-cap-weighted Index products and ETFs linked to MSCI equity indexes.
Analytics operating revenues of $166 million beat the consensus mark by 2.24% and increased 10.8% year over year. Organically, Analytics’ operating revenue growth was 11.2%.
Recurring subscriptions and non-recurring revenues increased 9.9% and 62.7% on a year-over-year basis, respectively.
ESG and Climate segment’s operating revenues of $80 million lagged the consensus mark by 1.96% but increased 12.1% year over year. Organically, ESG and Climate operating revenue growth was 10%.
Recurring subscriptions and non-recurring revenues increased 11.4% and 58.3% on a year-over-year basis, respectively.
All Other – Private Assets operating revenues, which primarily comprise the Real Assets operating segment and the Private Capital Solutions (formerly known as Burgiss), were $65 million, up 72% year over year. The figure beat the consensus mark by 0.40%. Organic operating revenue growth for All Other – Private Assets was 1.3%.
Operating Details
Adjusted EBITDA increased 14% year over year to $430 million in the reported quarter. Adjusted EBITDA margin was flat at 60.7% on a year-over-year basis.
Total operating expenses increased 18.2% on a year-over-year basis to $325.3 million.
Adjusted EBITDA expenses were $278 million, up 14%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount.
Operating income improved 10.6% year over year to $382.6 million. The operating margin contracted 170 bps on a year-over-year basis to 54%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2024, were $451.4 million compared with $519.3 million as of Mar 31, 2024.
Total debt was $4.5 billion as of Jun 30, unchanged sequentially. The total debt-to-adjusted EBITDA ratio (based on trailing 12-month-adjusted EBITDA) was 2.8 times, higher than management’s target range of 3-3.5 times.
As of Jun 30, 2024, free cash flow was $321.9 million, up 21.3% year over year compared with $275.9 million as of Mar 31, 2024.
MSCI had $0.6 billion outstanding under its share-repurchase authorization as of Jul 19, 2024.
It paid out dividends worth $126.6 million in the second quarter.
Guidance
For 2024, MSCI expects total operating expenses in the range of $1.305-$1.345 billion.
Adjusted EBITDA expenses are expected to be between $1.130 billion and $1.160 billion.
Interest expenses are expected to be between $185 million and $189 million.
Net cash provided by operating activities and free cash flow is expected to be $1.33-$1.38 billion and $1.225-$1.285 billion, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, MSCI has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is MSCI (MSCI) Up 5.1% Since Last Earnings Report?
A month has gone by since the last earnings report for MSCI (MSCI - Free Report) . Shares have added about 5.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is MSCI due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
MSCI Q2 Earnings Beat, Recurring Subscriptions Rise Y/Y
MSCI second-quarter 2024 adjusted earnings of $3.64 per share beat the Zacks Consensus Estimate by 2.25% and increased 11.7% year over year.
Revenues increased 14% year over year to $708 million, beating the consensus mark by 1.48%. Organic revenues increased 9.7% year over year.
Recurring subscriptions of $521.5 million increased 14.4% year over year and contributed 73.7% to revenues.
Asset-based fees of $163.3 million increased 18.2% year over year and contributed 23.1% to revenues.
Non-recurring revenues of $23.2 million fell 15% year over year and contributed 3.3% to revenues.
At the end of the reported quarter, average assets under management (AUM) were $1.631 trillion in ETFs linked to MSCI indexes.
The total retention rate was 94.8% in the quarter under review.
Top-Line Details
In the second quarter, Index revenues of $397.2 million surpassed the Zacks Consensus Estimate by 7.21% and increased 9.6% year over year. Recurring subscriptions and asset-based fees increased 8.1% and 18.2% on a year-over-year basis, respectively. Non-recurring revenues declined 28% year over year. Organically, Index operating revenue growth was 9.8%.
Growth in Index revenues included $0.18 million from the acquisition of Foxberry.
The uptick in recurring subscription revenues was primarily driven by strong growth from market-cap-weighted Index products and ETFs linked to MSCI equity indexes.
Analytics operating revenues of $166 million beat the consensus mark by 2.24% and increased 10.8% year over year. Organically, Analytics’ operating revenue growth was 11.2%.
Recurring subscriptions and non-recurring revenues increased 9.9% and 62.7% on a year-over-year basis, respectively.
ESG and Climate segment’s operating revenues of $80 million lagged the consensus mark by 1.96% but increased 12.1% year over year. Organically, ESG and Climate operating revenue growth was 10%.
Recurring subscriptions and non-recurring revenues increased 11.4% and 58.3% on a year-over-year basis, respectively.
All Other – Private Assets operating revenues, which primarily comprise the Real Assets operating segment and the Private Capital Solutions (formerly known as Burgiss), were $65 million, up 72% year over year. The figure beat the consensus mark by 0.40%. Organic operating revenue growth for All Other – Private Assets was 1.3%.
Operating Details
Adjusted EBITDA increased 14% year over year to $430 million in the reported quarter. Adjusted EBITDA margin was flat at 60.7% on a year-over-year basis.
Total operating expenses increased 18.2% on a year-over-year basis to $325.3 million.
Adjusted EBITDA expenses were $278 million, up 14%, primarily reflecting higher compensation and incentive compensation expenses related to higher headcount.
Operating income improved 10.6% year over year to $382.6 million. The operating margin contracted 170 bps on a year-over-year basis to 54%.
Balance Sheet & Cash Flow
Total cash and cash equivalents, as of Jun 30, 2024, were $451.4 million compared with $519.3 million as of Mar 31, 2024.
Total debt was $4.5 billion as of Jun 30, unchanged sequentially. The total debt-to-adjusted EBITDA ratio (based on trailing 12-month-adjusted EBITDA) was 2.8 times, higher than management’s target range of 3-3.5 times.
As of Jun 30, 2024, free cash flow was $321.9 million, up 21.3% year over year compared with $275.9 million as of Mar 31, 2024.
MSCI had $0.6 billion outstanding under its share-repurchase authorization as of Jul 19, 2024.
It paid out dividends worth $126.6 million in the second quarter.
Guidance
For 2024, MSCI expects total operating expenses in the range of $1.305-$1.345 billion.
Adjusted EBITDA expenses are expected to be between $1.130 billion and $1.160 billion.
Interest expenses are expected to be between $185 million and $189 million.
Net cash provided by operating activities and free cash flow is expected to be $1.33-$1.38 billion and $1.225-$1.285 billion, respectively.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed an upward trend in estimates revision.
VGM Scores
Currently, MSCI has an average Growth Score of C, however its Momentum Score is doing a bit better with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, MSCI has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.