CDK Global Inc. Earnings Beats Estimates Despite Weaker Currencies

CDK Global Inc. reported its fiscal third-quarter results before the opening bell this morning. The results were basically in line with analysts' consensus estimates after making adjustments. However, the company did have to lower its revenue forecast for the full year, as unfavorable foreign exchange rates are expected to weigh on the company.

A look at the numbersBecause ofits separation from ADP last October, CDK Global reports two sets of numbers: as reported, and then as adjusted. The as-adjusted number more accurately reflects the company's underlying operations, as it strips out some of the incremental costs of being an independent public company.

With that out of the way, let's look at the as-adjusted numbers. Revenue came in at $526.4 million, which was up 5% year over year. Growth was driven by the automotive retail segment in North America, as revenue grew to $347.3 million, or 8% over the prior year's quarter. Also strong was the company's digital market segment, as revenue grew to $106.2 million, up 11% year over year. The only laggard was the company's international automotive retail segment, with revenue up only 3%. Another issue working against the company in the quarter was an unfavorable foreign exchange rate, which clipped $14.7 million off the top line and nipped revenue by 2.5%.

Adjusted earnings grew by a much faster clip. Net income was $56.8 million, up 16% over the prior year's quarter. Meanwhile, earnings per share jumped 13% to $0.35 per share, which beat estimates by a penny. However, like revenue, earnings would have grown even faster if not for the 2% impact from unfavorable exchange rates.

Driving earnings growth was again the automotive retail segment in North America. Segment earnings rose 12% to $103.2 million, because of strong margin growth. Likewise, the digital marketing segment also contributed to strong profit growth. Segment earnings nearly doubled, thanks to robust margin expansion.

A look aheadCDK Global sees similar trends shaping up for the balance of 2015. It expects 5% revenue growth, which it sees being held down by 2% because of unfavorable exchange rates. However, the company sees much stronger earnings growth, as net earnings are expected to grow 15%, and earnings per share, which it sees 14%-15% higher than in the prior year.

Investor takeawayOverall, CDK Global delivered a pretty solid quarter that would have been even stronger if not for foreign exchange rates. Both of those trends are expected to continue in 2015 as the company sees solid revenue growth, with even stronger growth in earnings that are slightly muted by currencies.

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Matt DiLallo owns shares of Apple. The Motley Fool recommends Apple, Automatic Data Processing, and CDK Global. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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