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OZ Management Opens New Position in CDK Global

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OZ Management’s holdings in CDK Global

OZ Management commenced a stake in CDK Global Inc. (CDK) by purchasing 4,521,952 shares of the company, representing 0.5% of the fund’s 4Q14 portfolio. The stock is part of the iShares S&P MidCap 400 Index Fund (IJH) with an exposure of 0.42%.

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Fiscal 2Q15 results, raised outlook for fiscal 2015

In February 2015, CDK Global declared its fiscal 2Q15 results. It reported 7% growth on a year-over-year basis with revenue of $521.2 million. Earnings before taxes were $75.2 million. This was a 10% decline compared to fiscal 2Q14. Net earnings declined by 19% to $42.5 million. The firm’s earnings per diluted share were $0.26 per share.

Following are details of CDK Global’s revenue from its various business segments:

  • Automotive Retail in North America – The company’s revenue in this segment grew by 7% for fiscal 2Q15 on a year-over-year basis. The growth was mainly due to operating efficiencies as well as a favorable legal settlement in the same period.
  • Automotive Retail International – The revenue for this business segment increased by 3% for fiscal 2Q15. The pre-tax earnings increased by 20% as well. This was due to an increase in operational efficiencies.
  • Digital Marketing – Compared to fiscal 2Q14, the revenue in this business segment improved by a massive 17% in fiscal 2Q15. The pre-tax margins also increased due to lower employee benefit costs.

CDK Global has more debt in its capital structure compared to peers Intuit Inc. (INTU) and salesforce.com, Inc. (CRM). While the DE (debt-to-equity) ratio for CDK Global is 1.3x, it is only 0.4x for salesforce.com and 0.2x for Intuit.

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Shareholder value

CDK Global announced that its board of directors approved to buy back ~10 million shares of the company’s common stock as part of its share repurchase program. The deal can be implemented in the open market or in privately negotiated transactions.

About CDK Global

CDK Global, formerly the Dealer Services business unit of Automatic Data Processing (ADP), provides digital marketing and information technology solutions. The solutions offered by the company include assimilating and automating vital workflow processes, ranging from marketing campaigns to the financing and maintenance of vehicles, focusing on the use of data analytics.

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