Customers rely on Dun & Bradstreet (NYSE:DNB) for "insight about businesses", or namely, the ability to see if suppliers and their customers can pay their bills. Just like a credit check on individuals that firms such as Equifax (NYSE:EFX) and Fair Isaac (Nasdaq:FICO) specialize in, D&B operates a host of websites and databases that lets businesses check on other companies. It released fourth-quarter results on Thursday that saw U.S. sales rebound while international continues to grow briskly. Overall growth remains challenging, though the company is working to improve. IN PICTURES: 5 Investing Statements That Make You Sound Stupid

Fourth Quarter Recap
The fourth quarter reported that sales improved a respectable 4% to $481.7 million, though this was 7% when stripping out the effects of negative currency fluctuations. North America operating (or "core") revenues grew a modest 2% to account for nearly 73% of the total top line. The company operates in three business segments, the largest of which consists of the background checks on businesses. This domestic unit saw sales rise 1%. The second segment helps businesses sell and market their own services and reported 5% growth. The last segment consists of internet sites, including hoovers.com and allbusiness.com, and also consists of getting information on companies. It grew 1%. International revenue improved a robust 23%, to $130.7 million, as the first two operating segments posted double-digit growth. Internet solutions posted 2% growth.

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Cost controls helped boost operating income by 7% to $167.3 million, or a very healthy 34.7% of sales. Net income rose 5% to $96.5 million, or $1.92 per diluted share. These figures are from core operations and strip out a number of items management deemed to be one-time in nature.

Year-End Review and Outlook
Reported revenues fell 1% to $1.7 billion, as North American sales fell 1% and international jumped 17%. Operating income fell 12% to $480.8 million to reflect the operating difficulties earlier in the year as the economy was still on uneven footing. Net income fell 21% to $251.1 million, or $4.98 per diluted share. Free cash flow fell a bit less, declining 16% to $250 million. (For more on free cash flow, take a look at our video on Understanding Free Cash Flow.)

For the coming year, management expects a similar level of free cash flow and earnings growth between 6% and 10%. Core revenues should grow between 5% and 8%.

The Bottom Line
Dun & Bradstreet has struggled to grow its revenues consistently in recent years, but its business is extremely profitable. Net margins for the year were nearly 15%. So while the top line growth has been anemic, share buybacks and other cost cutting moves have allowed earnings to grow at a double-digit clip, on average.


Growth for the coming year looks a bit light on both the sales and profit front, and the earnings and free cash flow valuation are looking a bit lofty at close to 17-times. A share price below $80 would represent a better entry point and more favorable risk/reward tradeoff. Better-than-expected growth could make the valuation look more reasonable, which management is aiming for with new product offerings and investments in new technology. Allowing clients to access D&B information through mobile phones powered by Google (Nasdaq:GOOG) and Apple (Nasdaq:AAPL) was specifically cited during the earnings conference call.

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