How IHS Earnings Could Catch Up to Its Soaring Stock

IHS will release its quarterly report on Thursday, and investors believe that the information-solutions and analytics company has big prospects for the future. With its feet firmly planted in one of the hottest areas in the tech sector, IHS earnings have the potential to grow substantially both now and in the future.

Big data might be a relatively new concept for some investors, but IHS has been in the business of helping its clients use information to boost their business results for half a century. By gathering and analyzing specific types of essential information, IHS serves clients in industries from energy and utilities to finance and media. But how can IHS keep growing? Let's take an early look at what's been happening with IHS over the past quarter and what we're likely to see in its report.

Stats on IHS

Analyst EPS Estimate

$1.18

Change From Year-Ago EPS

19.2%

Revenue Estimate

$468.48 million

Change From Year-Ago Revenue

21.5%

Earnings Beats in Past 4 Quarters

3


Source: Yahoo! Finance.

Can IHS earnings keep climbing higher this quarter?
In recent months, analysts have gotten a lot more optimistic about IHS earnings, boosting their August-quarter estimates by $0.04 per share but lifting their full-year projections much more sharply, more than $0.50 per share. The stock hasn't responded all that strongly to the boost in earnings expectations, although it's risen 4% since mid-June.

Part of the reason why IHS shares haven't performed better involves concerns about sales growth. In its May quarter, IHS only managed to grow revenue by 8%, with even slower growth from its consulting and software licensing business. A slight drop in net income also spooked investors looking for faster growth from the company, and the company noted "difficult global economic headwinds" that held IHS back from what could have been better results.

But IHS continues to drive its growth through big acquisitions. In June, the company announced it would buy R.L. Polk, the privately held company that owns the car-history information service Carfax. The move will bolster IHS' automotive offerings, and similar deals in the past have created gains in other important segments of its business. Last month, IHS raised its full-year guidance for 2013 and said that it expects the Polk buyout to add $0.40 to $0.50 per share in adjusted earnings during 2014.

Moreover, IHS has sought strategic partnerships to boost the value of its offerings. Late last month, the company announced a deal with John Wiley & Sons to let IHS resell a large part of Wiley's scientific and engineering library as part of IHS' subscription services.

One big area of growth for IHS is the energy business. With expanded capacity of its IHS Connect program, the company hopes to give energy analysts more information about the industry overall. Moreover, Norwegian energy giant Statoil signed on late last year to use an IHS software suite to help with its reporting and data-management needs, and getting more oil-industry players to follow suit could give IHS a bigger piece of the growing industry.

In the IHS earnings report, watch to see how the company has done in integrating R.L. Polk. Further guidance on the impact of the merger will be instrumental in driving growth in the near-term.

What's ahead for energy?
The energy boom hasn't just helped IHS. Record oil and natural gas production is revolutionizing the United States' energy position. For a limited time, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free. 

Click here to add IHS to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

The article How IHS Earnings Could Catch Up to Its Soaring Stock originally appeared on Fool.com.

Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter @DanCaplinger. The Motley Fool recommends Statoil. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

Learn about investing from the comfort of your own home.

Portfolio Basics

Take the first steps to building your portfolio.

View Course »

Investment Strategies

Learn the strategies you need to build a winning portfolio

View Course »

Add a Comment

*0 / 3000 Character Maximum