RBC Capital previews Business Services earnings week

Tuesday, February 25, 2025 – Analysts at RBC Capital have provided a preview of the fourth quarter 2024 earnings for several Business Services companies, offering insights into what to expect as these firms report their results this week. For Verisk Analytics, Inc. (NASDAQ:VRSK), which reports earnings tomorrow, RBC Capital anticipates that the company’s fiscal year 2025 guidance will align with its mid-term outlook, projecting 6-8% revenue growth and a 25-75 basis points expansion in margins. According to InvestingPro data, VRSK has demonstrated strong execution with a 7.16% revenue growth and impressive 68.24% gross profit margins in the last twelve months. The firm’s FY25 earnings per share (EPS) estimates for VRSK are slightly below the consensus, factoring in certain below-the-line items. With a current market capitalization of $42.1 billion and trading near its 52-week high of $298.71, VRSK appears overvalued according to InvestingPro’s Fair Value analysis. The company is expected to see strong subscription growth in 2025, driven by various factors including forms, rules, loss costs, anti-fraud analytics, and pricing tailwinds, despite these being lower than in the previous two years. A robust insurance market and revamped sales incentives are likely to bolster cross-selling, while transaction growth is anticipated to benefit from improved auto insurance marketing. However, RBC Capital is keeping an eye on potential challenges such as tough comparisons from higher auto insurance shopping, catastrophe bond issuance, and the effects of hurricanes Helene and Milton in the fourth quarter of 2024, as well as the transition of transaction revenues to subscription models. Verisk is viewed as a defensive stock well-suited to weather market volatility, supported by InvestingPro data showing a beta of 0.89 and consistent dividend growth of 14.71% over the past year. InvestingPro subscribers have access to 12 additional ProTips and a comprehensive Pro Research Report that provides deep insights into VRSK’s financial health, which currently rates as "GOOD" with a score of 2.86.

APi Group Corporation (NYSE:APG) had preannounced its fourth quarter 2024 and fiscal year 2025 guidance, shifting the spotlight to the first quarter of 2025 guidance and backlog. The results are expected to be a non-event, with RBC Capital predicting that APG’s stock is well-positioned for growth throughout the rest of 2025, as organic growth is set to accelerate.

For First Advantage Corporation (NASDAQ:FA), the focus is on the integration of the Sterling acquisition. RBC Capital suggests that Equifax Inc .’s (NYSE:EFX) results, which indicated an 8% decline in U.S. hiring for FY25, may have set a lower expectation for FA’s FY25 guidance. FA is projected to guide FY25 around the consensus estimates. The year 2025 is seen as a transition period for FA, with organic growth expected to turn positive following declines in the previous two years. This growth is anticipated to be driven by a moderation in base growth declines and bolstered by new wins and cross-selling. FA expects the Sterling acquisition to have a neutral impact on adjusted diluted EPS for 2025, considering the consolidation of Sterling’s results, the acquisition’s impact on the capital structure, and the timing of synergy realization. Nonetheless, FA is expected to achieve long-term growth, significant margin expansion from cost synergies, and mid-to-high 20% EPS growth through de-leveraging by 2026.

Lastly, for ADT Inc. (NYSE:ADT), key metrics to watch include installation revenue growth, recurring monthly revenue (RMR) additions, attrition, and payback period for the fourth quarter of 2024, as well as revenue growth and free cash flow (FCF) guidance for FY25. After approximately two years of restructuring, ADT’s streamlined business model and emphasis on smart secure homes are expected to drive revenue growth, EBITDA margin expansion, and improved FCF. The company is likely to see an uptick in installation revenues and progress with strategic initiatives such as Trusted Neighbor, the ADT+ platform, and partnerships with Google (NASDAQ:GOOGL) and State Farm. Improved direct sales and retention rates could also contribute to revenue growth, although this could be partially offset by slower monitoring revenue. EBITDA margins are expected to benefit from cost discipline, reduced service costs with ADT+ and virtual call resolutions, and the implementation of the Google CCAI platform in 2025.

In other recent news, Verisk Analytics has projected significant insured property losses from the Palisades and Eaton (NYSE:ETN) fires in Los Angeles, estimating between $28 billion and $35 billion in damages. This makes it one of the highest loss estimates in the industry, with the Palisades fire alone accounting for $20 billion to $25 billion. The fires have been devastating, destroying hundreds of homes and stretching resources to their limits. Meanwhile, BMO Capital Markets has increased its price target for Verisk Analytics to $280, maintaining a Market Perform rating due to the company’s financial resilience and growth in its Claims segment. Barclays (LON:BARC), however, downgraded Verisk from Overweight to Equalweight, keeping the price target at $310, citing a more cautious outlook but acknowledging solid performance. RBC Capital Markets has retained its Outperform rating with a $300 price target, projecting revenue increases and margin growth for Verisk in fiscal year 2025. The firm anticipates strong subscription growth driven by various factors, including anti-fraud analytics and pricing tailwinds. These developments highlight Verisk’s strategic focus on expanding its subscription base amid a robust insurance market.

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