Company Reports

Wolters Kluwer reported solid results in its first-quarter trading update. Organic revenue growth was 6%, which is tracking in line with FactSet consensus and our estimate for fiscal 2024. In addition, Wolters Kluwer asserted the first-quarter EBIT margin increased (the actual number was not disclosed). Fiscal 2024 guidance was confirmed. We don’t expect to make a material change to our EUR 137 fair value estimate.

We’re initiating coverage of RELX, Wolters Kluwer, and Clarivate; three companies in the business information industry that provide curated data, analytics, and software solutions to a variety of professionals in academia, health, law, finance, government, and others. RELX has a wide moat, fair value estimate of GBX 3,650, and 4-star rating. Wolters Kluwer has a wide moat, a fair value estimate of EUR 137, and 2-star rating. Clarivate has no moat, fair value estimate of EUR 137, and 3-star rating.

Wolters Kluwer, based in the Netherlands, is a global provider of business information, software, and services. It generates revenue mainly by creating and selling access to information databases, analytics, and journals; selling software for professional accountants and for businesses to manage their compliance requirements; and legal services for businesses such as registered agent services and due diligence.

We are dropping coverage of Wolters Kluwer. We provide broad coverage of more than 1,500 companies globally and periodically adjust our coverage according to investor interest and staffing.

Wolters Kluwer has over the past decade or so undergone a wholesale reorganization of its business, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 9% in 2020.

Narrow-moat Wolters Kluwer published a strong first-half update, with organic revenue up 7% year over year and operating profit ticking up ahead of this, highlighting the level of operating leverage inherent in the business model. With a strong six months behind it, management is upgrading its full-year guidance around operating profit and EPS growth a touch. Although we expect to adjust our near-term estimates on the back of this update, we do not expect this to have a material impact on our EUR 68 fair value estimate. At these levels we believe the shares are overvalued.

Wolters Kluwer has over the past decade or so undergone a wholesale reorganization of its business, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 9% in 2020.

Narrow-moat Wolters Kluwer printed a solid first quarter, with organic revenue growth of 8% and full-year guidance reaffirmed. While inflation hit staff costs over the period, this was more than compensated for by the effects of operational gearing as volume ramped up in a number of key areas. Having recently adjusted our near-term forecasts, we do not expect to make any material adjustments to our numbers on the back of this update. We reiterate our EUR 61 fair value estimate and believe the shares sit firmly in overvalued territory.

Wolters Kluwer has over the past decade or so undergone a wholesale reorganization of its business, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 8% in 2021.

Organic revenue growth of 6% marked a strong year for narrow-moat Wolters Kluwer. One of the stocks under our business services coverage least affected by the coronavirus pandemic, recurring revenue make up 80% of the total, meaning that for the most part, clients simply rolled over their subscriptions during the period. The pickup in 2021 was largely down to the nonrecurring part of the equation, with growth here rising to 6% over the period. We do not expect to make any material changes to our forecasts on the back of this update, and reiterate our EUR 61 fair value estimate but believe the shares sit firmly in overvalued territory.

Narrow-moat Wolters Kluwer’s trading update for the first nine months of the year reads well. Organic revenue growth hit 6%, driven by pent-up demand for non-recurring services, and operating profit rose by 14% on a constant currency basis. Investors will also be heartened to see management raise full year guidance for EPS growth, from high single-digit to low double-digit growth. Although we will likely tweak our near-term estimates on the back of these additional data points, we do not expect this to have a material effect on our EUR 61 fair value estimate. We believe the shares sit firmly in overvalued territory

Wolters Kluwer has over the past decade or so undergone a wholesale reorganization of its business, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 9% in 2020.

Narrow-moat Wolters Kluwer published a robust first-half update, with organic revenue up 5% and operating margin up 170 basis points on an adjusted basis. Management has tightened up its full year guidance, with operating margins expected to be around 25%, a 60-basis-point improvement on 2020, which given the resilient performance in 2020, is a solid feat. We may tweak our near-term forecasts in the coming period, but do not expect this to have a material effect on our EUR 53 fair value estimate. We believe the shares sit firmly in overvalued territory.

Narrow-moat Wolters Kluwer published a strong first-quarter update. Organic revenue growth bounced back to its pre-pandemic 4% level, and while one might assume that this was against easy comparatives, looking back at the first quarter of 2020 the impact of the pandemic had not yet begun to affect the business in any meaningful way. The company reiterated its full-year guidance, and we do not expect to make any material changes to our forecasts on the back of this update. We reiterate our EUR 53 fair value estimate. At these levels we do not believe that the shares offer good value.

Wolters Kluwer has undergone a wholesale reorganisation of its business over the past decade or so, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 9% in 2020.

Wolters Kluwer has undergone a wholesale reorganisation of its business over the past decade or so, taking it from being the leading print publisher of professional information materials to being one of the largest players in the potentially much larger digital information services space. This change has come at a cost, however, with the company spending over EUR 2 billion on net acquisitions over the period in order to position itself better in the digital information services market. Wolters’ legacy print business, which is declining at a high-single-digit rate each year, has proved to be a drag on the overall business, with organic revenue growth improving to 4.3% in 2019, the highest level in over a decade, while the proportion of print revenue fell to a new low of 9% in 2020.

Narrow-moat Wolters Kluwer finished the year off strongly, with organic revenue growth of 2% and EPS up 7% year over year. A step down from the more than 4% organic revenue growth level the company has reached over the last few years, but a very solid result given the disruption of the coronavirus pandemic over the period. Investors have come to expect a certain level of resilience from the Wolters Kluwer business model over the years, hence why the share price fell a modest 20% at the outset of the pandemic last year, and this result will do more to ballast that view. We do not expect to make any material changes to our forecasts on the back of this update and reiterate our EUR 53 fair value estimate. At these levels we do not believe the shares offer good value.

Narrow-moat Wolters Kluwer printed a solid nine-month update, with growth continuing in the third quarter in much the same way it did in the previous quarter. Underlying revenue growth stood at 2%. Wolters Kluwer continues to tick along, albeit at a slightly slower pace as a result of coronavirus-related challenges. For investors, however, faced with the choice of investing in this, or more highly exposed stocks, it is clear to see why Wolters Kluwer has seen its share price recover back to prepandemic levels in such a short period. At these levels however, we believe the shares don’t offer great value, relative to our EUR 53 fair value estimate.

Narrow-moat Wolters Kluwer once again displayed the resilience and consistency of its business model with a solid first-half update. Despite the ongoing crisis the company booked organic revenue growth of 3%, while recurring revenues, 82% of the group total, were up 4% over the period. Having recently revised our near-term forecasts, we do not expect to make any material changes on the back of this update. We reiterate our EUR 53 fair value estimate. With the shares having rallied almost 30% from their March lows, we believe they are now in overvalued territory.

Further to its pre-release a couple of weeks ago, narrow-moat Wolters Kluwer updated the market on May 6 with some finer detail around its first-quarter update and more recent trading. Having reported a relatively unaffected first quarter, with organic revenue growth of 4%, all eyes were on the run rate. Long story short, although the company is faring well, with its recurring revenue stream (82% of revenue in the first quarter) motoring-on almost unrelentingly through the crisis, transactional revenue--and in particular print-based products--are taking the brunt of the impact. So, while the bulk of the business is doing fine, there will undoubtedly be a drag from peripheral areas over the coming quarter. As such, we are again tweaking our near-term forecasts to reflect this, with our expectation now of just under 2% organic revenue growth for the full year, down from 4.3% in 2019. Additionally, we believe operating margins will take a minor impact, declining by around 30 basis points year over year. We reiterate our EUR 53 fair value estimate and believe that given the strong recovery in the share price over the last month, their valuation now looks rich.