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The Dun & Bradstreet Corporation: Initiation of Research Coverage

Friday, October 14, 2016

William Blair & Company initiated research coverage of The Dun & Bradstreet Corporation (DNB $128.28), the leading global provider of commercial (business) credit information used primarily for business-to-business transactions.

Analyst Tim McHugh estimated that the company would generate adjusted EPS of $7.36 in 2016 and $7.62 in 2017.

“We believe that Dun & Bradstreet is well positioned due to 1) the detailed accounts receivable data that the company receives from over 12,000 corporate partners; 2) strong relationships with third parties that provide additional data; 3) its ability to link disparate data to a unique identifier through its DUNS Number system; and 4) the global reach of its commercial credit data,” McHugh said. “The company’s business model is mostly subscription based and naturally scalable, with high returns on capital, high incremental profit margins, and strong free cash flow generation. The combination of these factors should drive solid earnings growth over the medium term.”

He added, “While the pace of organic revenue growth has been muted since the recession, trends have improved some over the last year (3% organic sales activity growth in 2015, up from 1.5% in 2014). The company should see gradual improvement in revenue growth from the inclusion of a faster-growing acquisition, potential stabilization in solutions sold to smaller businesses, continued growth of supply and compliance solutions, and above-average growth in advanced marketing solutions. The company is also nearing the end of a product improvement cycle to enhance the delivery capability of its products, making Dun & Bradstreet’s data available through wider channels (its SaaS platform, a client’s internal platform, or other third-party platforms). We believe these factors should push organic revenue growth closer to 3%-4% in 2017 and 2018 (compared with 1% in 2015).”

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William Blair or an affiliate does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as a single factor in making an investment decision.

William Blair or an affiliate is a market maker in the security of The Dun & Bradstreet Corporation.

William Blair or an affiliate expects to receive or intends to seek compensation for investment banking services from The Dun & Bradstreet Corporation within the next three months.

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Current Ratings Distribution (as of 9/30/16)

Coverage Universe
Outperform (Buy): 63%
Market Perform (Hold): 35%
Underperform (Sell): 1% 

Inv. Banking Relationships*
Outperform (Buy): 10%
Market Perform (Hold): 3%
Underperform (Sell): 0%

* Percentage of companies in each rating category that are investment banking clients, defined as companies for which William Blair has received compensation for investment banking services within the past 12 months.

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