Wall Street Not ‘Buying’ Nielsen Q4 Results

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“In Watch, we had a strong year,” Nielsen CEO Mitch Barns said of his company’s audience measurement segment that includes its TV and radio ratings services.


But, Nielsen’s struggles continue in its Buy segment, which offers marketers and retailers insight on consumer purchasing behavior.

These challenges have led to a sell-off of Nielsen shares less than an hour into Thursday’s trading on Wall Street, with NLSN off nearly 5% as of 10:10am Eastern.

At the Closing Bell, Nielsen was off a steep 9.7%, to $33.90.

Why? Nielsen’s net income slid despite a net revenue rise.

For Q4, Nielsen’s total net revenue grew to $1.76 billion, from $1.66 billion. Operating income increased to $357 million, from $341 million.

But, net income attributable to Nielsen shareholders cascaded to $81 million (23 cents per share) from $159 million (44 cents).

Nielsen has a reason: During Q4 the company recorded a provisional non-cash tax charge of $104 million, or $0.29 per share. Excluding this expense, net income per share on a diluted basis was 52 cents per share—an increase of 18.2% percent year-on year.

Investors weren’t swayed by this in early trading on Wall Street. Nielsen shares have now retreated to their lowest level since August 2013.

In prepared comments released early Thursday, Barns did neither discussed the net income decrease. Rather, he struck a positive tone. “We executed well on our key initiatives in Watch and Buy while contending with rapidly changing markets in 2017,” said Barns. “In 2018, we’ll continue to invest in innovation to drive growth and efficiency as we proceed on the path towards 2020.”

It cannot be denied, however, that Nielsen Audio and its TV-industry measurement services are driving the company for another quarter.

“Our teams were relentless in their efforts to enhance our Total Audience Measurement system and drive client adoption across all of its components,” Barns said. “As the market further evolves due to ongoing media fragmentation, Total Audience Measurement will serve as the foundation for our future, providing the measurement capability, scale, and flexibility necessary to best meet our clients’ needs.”

In the Buy segment, Barns noted, “We remain well positioned in Emerging Markets due to our investments in coverage and our balanced client portfolio.”

In “developed markets” such as the U.S., Barns struck a different tune.

“[T]he U.S. remains under pressure as clients persist in seeking efficiencies in their own businesses in a difficult growth environment,” he said, adding that Nielsen is continuing to drive the rollout of the Connected System “and increase coverage and granularity within our Total Consumer initiative, both of which will enable us to drive growth for Nielsen and our clients despite the environment.”

Revenue within the Watch segment for Q4 increased 15.9% to $913 million, or 14.8% on a constant currency basis, compared to Q4 2016.

Revenues within the Buy segment for Q4 decreased 2.3% to $848 million, or 5.3% on a constant currency basis, compared to the year-ago period.

Could investors be reacting to Nielsen’s full-year results, rather than its challenging Q4?

On a full-year 2017 basis, revenue increased 4.2%, or 3.8% on a constant currency basis, to $6.57 billion.

Again, this was led by the Watch segment: Revenue within the segment increased 11.9%, or 11.7% on a constant currency basis, to $3.34 billion. Revenue within the Buy segment decreased 2.7%, or 3.3% on a constant currency basis, to $3.23 billion, primarily due to markets such as the U.S.

What’s Nielsen’s outlook for 2018? It’s unchanged.

The company is maintaining its full year guidance as highlighted:

  • Total revenue growth on a constant currency basis: ~3%
  • Adjusted EBITDA margin growth on a constant currency basis: ~(60)bps
  • GAAP net income per share: $1.40 – $1.46
  • Free cash flow: ~$800 million