Smooth Sailing for Broadridge Ahead of Proxy Season

Broadridge reported a solid fiscal second quarter with revenue of $1.26 billion and adjusted EPS of $0.82. Broadridge’s revenue was 4% ahead of the FactSet consensus while adjusted EPS was in line. Broadridge now expects fiscal 2022 recurring revenue growth to come in at the high-end of its previous 12%-15% range. Adjusted operating margin is now expected to be 18.5%, down from 19.0% but the vast majority of this decline is optics in our view as the guide down is due to higher distribution (pass-through) revenue. Broadridge maintained its adjusted EPS and closed sales outlook. We believe shares are trading lower on the firm’s margin guidance and that the market is overreacting. We will maintain our narrow moat rating and fair value estimate of $175.