We recently reiterated our Neutral rating on Acxiom Corporation (ACXM).
Last week, the share price of Acxiom declined significantly with the news of senior management exiting the company. The company’s CEO and President John A. Meyer resigned from his positions, effective March 28, 2011. Additionally, CFO Christopher W. Wolf will also resign from his position in the second quarter of 2011, due to personal reasons.
The board of directors appointed Jerry D. Gramaglia, a member of the board, to serve as interim CEO while it looks for a permanent replacement. Mr. Gramaglia has been a director of Acxiom since 2009.
Concurrent with this news, Axciom also updated its guidance for the fourth quarter and fiscal year 2011. Acxiom expects revenues between $295 million and $299 million in the fourth quarter and a loss of $1.03–$0.49 per share. Excluding goodwill impairment charges, other restructuring and impairment charges in both the U.S. and international operations, Acxiom expects to record an EPS of 18 cents to 22 cents in the fourth quarter.
Acxiom announced that it expects to incur a non-cash impairment charge of approximately $50–$90 million in the fourth quarter of fiscal 2011, related to a write-down of the carrying value of goodwill and other long-lived assets associated with its international operations.
For fiscal 2011, Acxiom projects revenues between $1.156 and $1.160 billion. EPS is forecast between ($0.49)–$0.05. Excluding one-time items, Acxiom forecasts EPS between 68 cents and 69 cents.
The slowing economy has hurt Acxiom’s top-line growth, which fell 14% year over year in 2010 due to reductions in certain Infrastructure Management contracts, services revenue from the Financial Services industry, international operations and lower volumes. Recently, the top-line suffered due to the loss of two large service contracts in Europe.
Although we expect improved performance in fiscal 2011 as IT spending picks up, we await better clarity given the uncertainty around the management team. We maintain our NEUTRAL recommendation supported by a Zacks #3 Rank which translates into a short-term rating of Hold.
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