Thursday, October 29, 2009

We've made a nice gain on Acxiom (ACXM)

Interactive marketing firm Acxiom(ACXM) is up 15% today after reporting a decent quarter.

After the close of trading on June 24th, they preannounced an ugly quarter, and I wrote that we should expect them to trade down when trading resumed and maybe buy some shares the next morning, which AlphaNinja investors did. We're sitting on a nice 27% gain, and there's room to go higher.

Acxiom is by no means hitting the cover off the ball, but that's why we were able to pick up shares for a big Free Cash Flow Yield.

Positives from last nights earnings announcement and conference call:

-->>"several of our clients have indicated to us that they expect to increase their marketing spending during the second half of our fiscal year. This anticipated increase in client spending coupled with our continued emphasis on expense management gives us confidence that our second half operating income performance will improve over the first half of the fiscal year."

-->> "During Q2, we announced our expansion into the Middle East and North Africa with the acquisition of DMS, or Direct Marketing Services, in the kingdom of Saudi Arabia and United Arab Emirates. What’s most exciting about this developing market is where less than 1% of the $3 billion in advertising spend goes towards the targeted marketing like the services Acxiom provides"

I like that interest expense was down to $5.4million for the quarter from $8.6million a year earlier, due to lower average balance and lower interest rates (to the tune of 1.7%!). Adding Depreciation and Amortization back to operating income, the company covers its interest expense 11.5 times. Nice.

I do NOT like that cash collection was unimpressive. Days sales outstanding (DSO's) were 62, up from 56 in March but still an improvement from last September's 68.

Wall Street earnings per share(EPS) estimates for the year ended March 2010 are currently right around my estimate of 50cents. I'm reducing my D&A (Depreciation & Amortization) estimate and boosting my CAPEX (Capital Expenditures) number, which results in me taking my Free Cash Flow estimate down to $120million. Probably conservative, but that's fine. Netting out the $167million in balance sheet cash, this company still has a 17% FCFY (Free Cash Flow Yield). That's a great deal for a company whose operational improvements are largely in front of them. I'm still long the shares, and think they'll head higher.

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