Market Overview

D&B Needs Another Earnings Surprise


Dun & Bradstreet Corporation (NYSE: DNB) - or D&B, as it is popularly known - is set to release its earnings for the quarter ending on December 31, 2011 this Monday. The Street is expecting the company to follow the previous quarter's positive earning surprise with yet another positive earnings surprise.

D&B is commercial information provider. It maintains a global database with over 195 million business records, which are used by companies throughout the world to help make critical business decisions. Along with this information, the company provides risk management services and marketing and strategy solutions.

The company, headed by Sara Mathew, currently has over 5,200 full time employees. Mathew joined D&B as chief financial officer in 2001. From that position, she went on to become chief operating officer, president, and then finally chief executive officer. Before D&B, she was vice president of finance for Procter & Gamble (NYSE: PG), where she worked for 18 years.

In recent years, D&B has undergone restructuring to make it a more tightly focused company. It spun off Cognizant, Nielsen and Moody's Corporation, so that each could pursue its own strategies.

In 2011, D&B formed a strategic alliance with Salesforce (NYSE: CRM) to increase its reach and debuted D&B 360, an improved database for CRM platforms. Near the end of the year, the company announced a $500 million share repurchase program, indicating that the company thinks its stock is undervalued.

Just last month, the company launched its new portfolio risk management service, which offers clients better strategic risk management solutions to help improve earnings and safeguard against extreme events. It was a low cost way for the company to continue to diversify.

For the quarter tending on September 30, 2011, the company had an operating income of $100 million, a 12 percent increase over the previous quarter. Much of this increase was a direct result of the alliance between D&B and Salesforce.

In addition, D&B's operating margin improved to 24.82 percent, and its profit margin to 14.90 percent. Expenses have also been significantly lowered.

However, at the same time, the company has been making investments which might not provide benefits in the near-term and have increased long-term liabilities. In addition, cash flows from operating activities have dropped significantly in the last quarter.

The company may need to improve and then sustain its cash flows to keep maturing debts and other commitments at bay.

The Street is expecting D&B to increase its per share value, considering the company's improved sales and successful new services. Because investors have been anticipating good results, D&B's share price has been going up.

If D&B's latest results are not in line with market expectations, it will be difficult for the company to maintain its current price levels.

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