The Dun & Bradstreet Corp. $83 – New York symbol DNB

THE DUN & BRADSTREET CORP. $83 (New York symbol DNB; Conservative Growth Portfolio, Finance sector; Shares outstanding: 56.6 million; Market cap: $4.7 billion; WSSF Rating: Average) focuses on credit reports for individual companies, not bonds or asset-backed securities, so it’s less exposed to the problems in the mortgage industry than Moody’s or Standard & Poor’s. Dun & Bradstreet’s reports cover over 125 million companies in 200 countries. Clients use its products to make lending and buying decisions. The United States accounts for around 80% of its revenue. Corporate information accounts for 60% of Dun & Bradstreet’s revenue, and the slowdown in lending activity has hurt demand for its reports. The remaining 40% of its revenue comes from products and services that help clients expand sales and improve customer loyalty. Thanks to a successful cost control plan, Dun & Bradstreet’s earnings rose 7.4% in 2007, to $277.3 million from $258.3 million in 2003. The company spent $408.5 million on stock buybacks in 2007. That’s why its earnings per share rose 18.4%, to $4.70 from $3.97. Revenue grew 6.7%, to $1.6 billion from $1.5 billion. Dun & Bradstreet has unveiled a new restructuring plan that should save it $80 million a year, including $65 million in 2008. The plan will cost up to $40 million to implement. The company is also using acquisitions to expand its expertise into new businesses. For example, it recently paid an undisclosed sum for Visible Path, an online social networking web site for business professionals. This purchase should strengthen Dun & Bradstreet’s client relationship products. Dun & Bradstreet also paid $55 million for All- Business.com, which provides a wide variety of information aimed at small businesses. The purchase looks like a good fit with Dun & Bradstreet’s other web sites. Costs to integrate this new operation will cut Dun & Bradstreet’s 2008 earnings by around $0.06 a share. But it should make a positive contribution in 2009. Dun & Bradstreet’s long-term debt of $724.8 million is just 15% of its market cap. It also has cash of $175.8 million or $3.10 a share, so it can easily afford more acquisitions. Dun & Bradstreet also continues to sell its less profitable operations. Due to increasing government regulation, it recently sold its real estate data business in Italy. The company received $9 million, while the buyer assumed $17 million in liabilities. The stock is down from its peak of $108 in July 2007. It now trades at 16.0 times its likely 2008 earnings of $5.20 a share. However, we feel the stock will make little progress until credit markets improve. The $1.20 dividend yields 1.4%. Dun & Bradstreet is a hold.