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IHS May See Markit Merger Headwinds, But Baird Still Finds It Attractive

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Baird analysts expect IHS Inc. (NYSE: IHS) to face Markit Ltd (NASDAQ: MRKT) merger headwinds. However, the brokerage finds the stock to be an attractive one. It has a Neutral rating and slashed the price objective to $122 from $132.

The brokerage believes results, as well as fine-tuned guidance included compensating positives and negatives. For instance, it named Transportation/Auto as performing exceptionally well. However, the company's resources, as well as Resources/energy bookings have yet to see the stability.

The analysts wrote in a note, "Organic subscription revenue trends are soft, but margin performance and guidance is excellent. We view risk/reward increasingly favorably in standalone IHS, but are looking to gain conviction in MRKT (not covered) ahead of close of "merger of equals."

The analysts added, "We find current risk/reward in pre-merger IHS intriguing, given combination of: - Valuation, trading at ~14.4x NTM adj. FCF/sh. (using our adj. EBITDA estimate and assuming ~65% FCF conversion), with what we view as slightly elevated but reasonable financial leverage (3.5x net debt/LTM EBITDA)."

The brokerage believes its IHS Energy business was challenged by certain "difficult end-market conditions." The analysts also think that bookings have yet to see stabilization. However, the brokerage said it view IHS Energy as a strong, wide moat business.

Latest Ratings for IHS

DateFirmActionFromTo
Mar 2016MaintainsHold
Mar 2016DowngradesBuyNeutral
Mar 2016MaintainsNeutral

View More Analyst Ratings for IHS
View the Latest Analyst Ratings

Posted-In: BairdAnalyst Color Price Target Reiteration Analyst Ratings Press Releases

 

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