Nielsen's (NLSN) Q2 Earnings and Revenues Beat Estimates

Nielsen Holdings plc NLSN reported second-quarter 2020 adjusted net earnings of 41 cents per share, which surpassed the Zacks Consensus Estimate of 29 cents. However, the bottom line was down 22.6% from the year-ago quarter.

Total revenues came in at $1.5 billion, which declined 8.1% year over year. Also, the figure declined 5.9% on a constant-currency basis.

However, the top line surpassed the Zacks Consensus Estimate of $1.48 billion.

Segments Details

Nielsen Global Media: The company generated revenues of $811 million (accounting for 54% of total revenues) from this segment, reflecting an decline of 5.3% from the year-ago level or 4.6% on a constant-currency basis.

We note that Audience Measurement revenues decreased 3.1% year over year to $603 million, reflecting the impact of the COVID-19 pandemic on sports and non-contracted revenues. Also, pressure in local television measurement attributed to the downfall.

Further, Plan/Optimize revenues were $208 million, which decreased 11.1% year over year due to the COVID-19 pandemic.

Nielsen Global Connect: The company generated revenues of $685 million (46% of total revenues), reflecting an 11.3% decline from the year-ago period. Also, the figure decreased 7.4% on a constant-currency basis.

Revenues in Measure came in at $495 million, decreasing 9.3% year over year. Further, Predict/Activate revenues decreased 15.9% from the year-ago quarter to $190 million.

Nielsen Holdings Plc Price, Consensus and EPS Surprise

Nielsen Holdings Plc price-consensus-eps-surprise-chart | Nielsen Holdings Plc Quote

Operating Results

Adjusted EBITDA was $426 million for the second quarter, down 9.4% from the prior-year level. Adjusted EBITDA margin contracted 39 basis points (bps) to 28.5%. The decrease reflected weakness in both the segments due to the COVID-19 pandemic and increased investments in Media, partially offset by cost savings.

Nielsen’s selling, general and administrative expenses were $451 million, decreasing 6.6% from the year-ago figure. As a percentage of revenues, the figure expanded 40 bps year over year to 30.1%.

Operating income was ($64) million for the quarter. In the year-ago quarter, operating income was $149 million.

Balance Sheet & Cash Flow

As of Jun 30, 2020, cash and cash equivalent balance was $438 million, up from $359 million on Mar 31, 2020.

At second quarter-end, gross debt was $8.42 billion compared with $8.41 billion at the end of the prior quarter. Net debt (gross debt excluding cash and cash equivalents) was $7.98 billion and net debt leverage ratio was 4.46 at the end of the reported quarter.

Cash flow from operations increased to $250 million from ($5) million in the first quarter. Further, capex totaled $120 million and free cash flow amounted to $130 million for the second quarter.

2020 Guidance

The company updated its 2020 guidance.

It has narrowed 2020 revenue expectation on a constant-currency basis. Revenues are expected to decline in the range of 2-4% from the previous expectation of 1-4% fall.

Further, adjusted earnings are expected between $1.50 and $1.62 per share versus prior expectation of $1.43-$1.58.

Adjusted EBITDA is anticipated in the range of $1.800-$1.860 billion versus $1.790-$1.860 billion projected earlier. Adjusted EBTDA margin is expected between 29% and 30% versus earlier expectation of 28.5-29.5%.

Additionally, Nielsen expects free cash flow in the range of $480-$530 million versus prior projection of $460-$530 million.

Zacks Rank & Key Picks

Nielsen currently has a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector include Dropbox DBX, MercadoLibre, Inc. MELI and Analog Devices ADI. While Dropbox sports a Zacks Rank #1 (Strong Buy), Analog Devices and MercadoLibre carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Both Dropbox and MercadoLibre are scheduled to report quarterly earnings on Aug 6. Analog Devices is set to release quarterly results on Aug 19.

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