Dun and Bradstreet (DNB) Sharply Lower on Negative Outlook, China Closure

Shares of corporate and business information provider, Dun & Bradstreet Corporation (DNB: Charts, News) closed down -10.66 or -14.08 percent to $65.04 per share on Tuesday, after the company reported mixed results for its first quarter. In addition to the earnings report, the company also disclosed it would be closing down its Shanghai Roadway D&B Marketing Services Co. in China after the Chinese subsidiary was accused of violating local consumer data privacy laws.

Dun & Bradstreet reported late Monday first quarter net income had risen to $64.4 million, or $1.32 per share, from $49.8 million or $1.00 per share in the same period one year ago. After taking certain charges related to restructuring and associated write-downs on Shanghai Roadway, the company's earnings increased to $1.35 per share.

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Short Hills, NJ based Dun and Bradstreet Corporation licenses information on businesses and corporations around the world. Its reports are often used in mergers and acquisitions, supply chain management, B2B marketing and for credit purposes among different businesses.

While earnings for the first quarter came in on the lower end of analyst expectations of $1.35 to $1.38, Q1 revenue came in at $402.8 million, versus $403.6 million in the same period one year ago. The analyst consensus was for revenue of $398 million.

Along with the mixed earnings picture, the company's guidance for the entire year of 2012 was revised lower than it had previously anticipated. The company is now expecting core revenue, excluding foreign exchange effects, to be flat to three percent higher, versus a previous forecast of three to five percent higher.

Dun & Bradstreet suspended operation at its subsidiary in China, Shanghai Roadway following accusations by the Chinese government. In a teleconference after the earnings release, D&B CEO Sarah Mathew stated that,

"We are dealing with 2 separate but related issues: first, potential violations of the Foreign Corrupt Practices Act, or FCPA, which we self-reported to the SEC and Department of Justice in March; second, allegations by the Chinese government that certain data collection practices at our Roadway operation may violate local consumer data privacy laws. We are proactively working on both these matters and made a decision to permanently shutter our Roadway business."

Investors seem mainly concerned with the fall-off in North American revenues. According to the company's earnings report, core revenue for North America fell from 75 percent to 73 percent in Q1, while revenue in the Asia Pacific region increased from 10 percent in 2011, to 12 percent in the first quarter.

Dun & Bradstreet stock had traded to its 52-week high of 86.52 recently, and has been correctively trading lower since late March. Given the revised forecast, the stock could continue heading south, or it could be nearing the end of the sell-off.

With current valuations, the company is trading at 14.3 times earnings of $5.28 per share, which makes the stock appear to be undervalued at these levels. CEO Sarah Mathew concluded her statements saying, Our flexible business model will allow us to resize our expense base to match the lower revenue growth and deliver our profit commitments in 2012. If D&B delivers, its stock might be nearing a bottom.

Other News About DNB
Dun & Bradstreet's CEO Discusses Q1 2012 Results
CEO Sarah Mathews discusses the company's first quarter results.
Dun & Bradstreet shuts tainted China unit
Reuters article on China shutdown. Other Stocks in the News
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Published on May 9, 2012
By Jay Hawk
Jay Hawk
Jay Hawk enjoyed a 12-year professional financial markets career incorporating extensive first hand futures and options experience obtained by trading in the stock, commodity and forex markets on U.S. exchanges. Since retiring as a full-time financial market professional, he has been actively trading stock, commodities, forex and options for his own account and managing funds for others, as well as writing financial market commentary and educational articles.

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