Piper Jaffray Upgrades IHS Markit (INFO) to Overweight
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Piper Jaffray upgraded IHS Markit (NASDAQ: INFO) from Neutral to Overweight with a price target of $43, implying upside of 22%. Analyst Peter P. Appert noted strong earnings momentum and visibility.
"We believe the combination of IHS and Markit creates a leading data/analytics company in the energy, transportation and financial services markets. Improving margin trends, leverage from aggressive repurchase plans, and acquisition synergies should drive healthy EPS growth over the next several years, creating interesting upside potential in INFO shares," said Appert.
"Both IHS and Markit enjoy leading shares in their respective niche information markets. Must-have, difficult to duplicate data in the energy, chemicals, automotive and financial industries have translated to deep customer relationships, with high revenue visibility driven by largely subscriptionbased revenues with high customer renewals rates," continued the analyst.
Appert added, "The new entity will have an improved margins thanks to the higher margin profile of the Markit businesses (32.5% and 44.4% adjusted EBITDA margin for FY15 IHS and Markit standalone). More importantly, underlying margin trends have been improving at IHS, and with an expected $125M in cost synergies over the next several years, we think IHS Markit combined margins can easily approach 40% over the next several years. Improving margins provide considerable earnings visibility even in the context of more modest near-term revenue growth expectations. Management is committed to margin expansion of 100bps each year. We think that this goal is achievable given the build-once, sell-many-times model."
Shares of IHS Markit closed at $35.26 yesterday.
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Create E-mail Alert Related CategoriesAnalyst Comments, Analyst EPS View, Upgrades
Related EntitiesPiper Jaffray, Earnings, Definitive Agreement, Peter Appert
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