Acxiom Stock Plunges After Reduced Earnings Projections

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Shares of Acxiom Corp., Conway, AR, fell steeply this week after the company projected that its earnings per share would grow by only 15 percent to 20 percent during the next two years. Some analysts, who had been projecting earnings growth of 25 percent or better, said the sell-off was an overreaction and applauded Acxiom's overall strategy.


The company said it would make significant investments in its Acxiom Data Network and its AbiliTec database technologies, which it projected have the potential to increase its revenues significantly in the long run but would require large investments in the short term.


"We are fundamentally rethinking everything we do at Acxiom around AbiliTec," said Mike Wallis, a business unit leader at Acxiom, in an interview at the Direct Marketing Association's annual conference in Toronto this week.


The company said that its AbiliTec technology, which it first unveiled in September, can be used by direct marketers in customer relationship management, database building and in expediting the merge-purge process for prospect lists. It allows companies to link instantly to their customer records and match them with the data in the Acxiom Data Network, which includes information on more than 176 million consumers.


The company expects to generate revenues from the product by charging licensing fees and tallying additional incremental charges for transactions that exceed the usage terms of the license. The exact pricing structure has not yet been determined, Wallis said, but will involve a graduated scale in which customers will pay a lower cost per transaction as they execute more transactions with the system.


The company has about 70 potential customers for the product in the sales pipeline, said Dena deBin, a sales leader who works with the product.


Investors don't seem to have that much faith in AbiliTec, however, as they knocked about a third of the value out of the company's stock in one day this week, dropping it from just over $22 down to just under $15.


"Whenever you have earnings revisions, you usually see the stock fall in the same sort of relative amount," said Alexia S. Quadrani, who follows Acxiom for Bear, Stearns & Co. Inc., New York. "They revised their earnings growth down 10 or 12 percent, but having the stock fall 36 percent was an overreaction, I think."


In a research note, she said she was "disappointed at the timing of this announcement," which came as the company reported better-than expected earnings for the second quarter and after the stock had rebounded during the past 30 days from a steady decline in the previous months, as investors were concerned about cash flow and about payments of money owed to the company. Acxiom in late August also said it would lay off 250 employees, or 5 percent of its work force, and has been hit with several shareholder lawsuits concerning its secondary stock offering earlier this year.


Quadrani continued to rate the stock as a good buying opportunity, however, saying that its valuation was favorable when compared with that of Harte-Hanks, San Antonio, a publicly traded competitor. She set a price target of $20 per share, accounting for the projected drop in earnings growth.


For the second quarter, which ended Sept. 30, Acxiom reported profits of $21.3 million, or 24 cents per diluted share, vs. a loss of $60.55 million, or 79 cents per diluted share, in the year-ago second quarter. Revenues for the period increased to $246.84 million, up about 37 percent from revenues of $180.03 million in last year's second quarter. Revenues from Acxiom's Services segment were up 54 percent, to $162.7 million; revenues from Information Technology were up 19 percent, to $43.7 million; and revenues from data products, which includes list firm Direct Media, were up 25 percent, to 60 million.


Portfolio Value: If $1,000 had been invested in each of these companies at the beginning of the year - for newly public companies when the stock first closed - the value would be $114,049, and increase of about 14 percent.
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