Broadridge Financial Solutions (NYSE:BR) lowered its fiscal 2011 outlook on Tuesday after reporting that second quarter revenues and profits fell on poor performance in the company's mutual funds business.
For the quarter ending December 31, 2010, the company, which processes information for financial and securities transactions, posted net income of $10.4 million, or $0.08 per share, down from $33.6 million, or $0.24 per share, in the prior year period.
Earnings from continuing operations fell to $0.08 per share from $0.37 per share in the second quarter of fiscal 2010.
Revenues dropped 16% to $442.3 million, driven by lower event-driven mutual fund revenues and related distribution sales, the company said.
According to Thomson Reuters, analysts estimated earnings of $0.13 per share on revenue of $467.76 million.
As a result of the decline in revenues, the company's second quarter pre-tax margin from continuing operations decreased to 3.7% from 12.9% a year earlier.
"Event-driven revenues are cyclical in nature and are difficult to predict," said CEO Richard J. Daly.
"Six months into our fiscal year we have no clear indication from our mutual fund clients of any imminent rebound; accordingly, we are lowering our full year forecast."
Indeed, the company said today it has lowered its guidance for 2011, cutting its earnings forecast from a range of $1.55 to $1.65 per share, to a range of $1.30 to $1.40 per share.
"To be clear, this year's unprecedented cyclical decline in event-driven activity should be considered a disappointing one-time event that we believe will not affect our long-term value creation goals as all of our key initiatives are on track to deliver the expected earnings growth.
"Due to the seasonality of our equity proxy business, the financial results for the second half of our fiscal year will be significantly greater than the financial results for the first half of our fiscal year," Daly added.
Despite the fall in its event-driven business, the company said that its recurring fee revenues grew as it signed a large contract in its securities processing segment during the quarter. Broadridge also had a 99% client revenue retention rate in the period, it said.
The Lake Success, New York-based company fell more than 6% in Tuesday morning trading to $21.73 as of 10:22am EST.
Broadridge builds the infrastructure that underpins proxy services for over 90% of public companies and mutual funds in North America, and processes more than $3 trillion in fixed income and equity trades per day.