SunTrust's Bob Peck Previews comScore Results, Discusses 'Important Findings From S-4'

• COMSCORE, Inc. SCOR shares are down 24 percent over the last three month, declining from a high of $64.64 reached on August 17.
• SunTrust Robinson Humphrey’s Robert S. Peck maintained a Buy rating on the company, with a price target of $65.
• Investor sentiment and expectations are low ahead of 3Q results scheduled to be reported by comScore and Rentrak Corporation RENT, Peck mentioned.

Analyst Robert Peck said that investors are expecting comScore’s 3Q results and guidance to miss consensus estimates due to the sequential decline in non-monetary transactions [NMT]. He enumerated the following factors that could help the company generate stronger sequential growth in order to achieve the implied cash guidance:

1. vCE Google went from beta to commercial in early August
2. vCE Reston launched in 9 new countries, and with Dentsu Aegis Network Ltd AEGSF in 2Q, vCE Reston Mobile went syndicated in June, and vCE Reston launched with 8 new video ad networks in July
3. xMedia went commercial during 3Q

Peck further pointed out that management was aware of the NMT headwind when it provided its guidance for 3Q. Since there has been limited visibility into the sequential buildup, comScore reporting in-line results and guidance “would likely be a positive outcome for the stock.”

In the report SunTrust mentioned the important learnings from comScore’s recently filed S-4:

1. Although Rentrak Corporation RENT had talks with four other strategic acquirers between May and August, all of them have decided against pursuing a merger.
2. comScore’s 2016 projections for Rentrak revenue and EBITDA are below consensus by about 12 percent and 53 percent, respectively.
3. Rentrak’s 2016 projections for comScore revenue and EBITDA are below consensus by around 1 percent and 4 percent, respectively.
4. Estimates for revenue and cost synergies are $10m and $28m for 2016, $43m and $10m for 2017 and $10m and $11m for 2018.

“Coupling the lower standalone projections with the synergy expectations, the pro forma company in 2017 would have ~22% top-line growth, ~32% EBITDA growth, ~27% EBITDA margin, and we estimate well over $2 in earnings putting current EV/revenue at ~3.5x, EV/EBITDA at ~13x, and P/E at ~20x,” Peck added.