On Tuesday, MSCI (NYSE: MSCI) experienced a notable surge of approximately 10% to surpass $608 per share, following the release of its Q4 and year-end earnings. MSCI, known for managing the MSCI indexes and providing analytics, data, risk management, and tools for institutional investors, reported substantial gains in revenue and earnings, coupled with an increased dividend.
Performance Highlights:
- MSCI demonstrated robust performance in Q4, benefiting from the positive momentum in stock markets during November and December.
- Operating revenue witnessed a remarkable 20% YoY surge, reaching $690 million, while the operating margin maintained an impressive 53.7%.
- Net income showed an 88% YoY increase, totaling $403.4 million or $5.07 per share.
- The results were positively influenced by higher revenue and a one-time gain of $97.1 million linked to the acquisition of the Burgiss Group, a data and analytics provider for private equity, in the previous year.
- Full-year net income for MSCI rose by 32%, reaching $1.15 billion, equivalent to $14.39 per share.
Revenue Streams:
- MSCI experienced gains in asset-based fees (up 15.9% to $145 million), recurring subscriptions (up 16.8% to $505 million), and non-recurring subscriptions (up 114% YoY to $40 million).
- Major business lines contributing to revenue include indexes ($388 million, up 17.8% YoY), analytics ($165 million, up 10%), ESG (environment, social, and governance) and climate ($76 million, up 20%), and private assets ($61 million, up 81%).
Dividend and Future Outlook:
- MSCI, recognized as a strong dividend stock, increased its quarterly dividend by around 16% to $1.60 per share for Q1. This marks the 10th consecutive year of dividend raises.
- The company’s high operating margins and robust free cash flow, amounting to $367 million in Q4 (up 24% YoY) and $1.145 billion for the full year, contribute to its appeal as a dividend stock.
- MSCI’s fiscal 2024 projection indicates a potential 7% increase in free cash flow to $1.225 billion to $1.228 billion.
- Chairman and CEO Henry Fernandez emphasized the commitment to returning excess capital to shareholders through stock buybacks and dividends, as well as making organic investments and acquisitions that add value.
Considerations:
- MSCI’s high valuation, with a price-to-earnings ratio of 46, suggests that its fortunes may be influenced by market fluctuations.
- While the company had a strong ending to a positive year, market expectations for 2024 may limit further upside in the shorter term, particularly with the markets not anticipated to be as robust.
