Last Call: RiskMetrics shares soar on 2Q results
NEW YORK—Shares of RiskMetrics Group Inc., which provides risk management and corporate governance services for the financial markets, soared Tuesday after it posted higher-than-expected second-quarter earnings due to higher sales in its asset management and hedge fund segments.
Shares rose $2.37, or 12.7 percent, to $21.07 in late afternoon trading.
Net income increased to $5.6 million, or 8 cents per share, for the three months ended June 30, from $456,000, or a penny per share, in the same period last year.
Excluding IPO costs, stock-based compensation and amortization of intangible assets, net income rose to 15 cents a share from 6 cents a share. Analysts polled by Thomson, on average, expect profit of 6 cents per share.
Total revenue rose 27 percent to $74.1 million, while analysts expected $71 million. ISS contributed $35.3 million to revenue.
On average, analysts forecast sales of $71 million.
The company's asset management segment grew 40 percent, while its hedge fun segment grew 34 percent.
"Given the increased volatility in the financial services market, our clients are placing an increasingly high priority on understanding and managing risk across their portfolios," said Ethan Berman, the company's chief executive.
Goldman Sachs analyst Peter Appert said the results showed "positive momentum" for RiskMetrics' business model, with the company's risk business showing the strongest performance. "The strength in RMG's 2Q results (the company's second quarter as a public company) reinforce the relevance and importance of the firm's risk assessment tools and products to clients (primarily institutional investors, including hedge funds) in an exceptionally volatile market," he said in a note to clients, using the company's New York Stock Exchange ticker. He noted the company's annualized contract value, or backlog, shot up 39 percent from last year, which points to "continued positive second half revenue and earnings growth."
Appert kept a "Neutral" rating on the shares, but said his estimates and price target are under review.
