IHS Inc IHS.N, publisher of Jane's Defence Weekly, reported second-quarter revenue below analysts' estimates due to slowing growth in its non-subscription business, sending its shares down 7 percent in early trading.
Overall revenue rose 8 percent to $418.1 million, missing the $423.3 million analysts had estimated.
The company's non-subscription business, which includes consulting, software licensing and events, grew 4 percent in the second quarter. The business accounted for 24 percent of IHS's revenue last year.
Chief Executive Scott Key blamed weak U.S. defense spending due to sequestration for the slow growth. Automatic federal spending cuts known as sequestration began earlier this year when Congress failed to agree on an alternative deficit reduction plan.
The Englewood, Colorado-based company gets about 5 percent of its total revenue directly from the U.S. government. Sequestration also has knock-on effects on other IHS customers.
The company has been trying to offset weak revenue growth through acquisitions. Organic revenue growth was 3 percent for the second quarter.
The company also said it had acquired PFC Energy, a consulting firm catering to the oil and gas industry.
Earlier this month, it agreed to buy privately held R.L. Polk & Co, the owner of used-car history provider Carfax and a leading provider of auto industry data, for $1.4 billion.
"We have a lot of growth room in the sectors we are in, so we are really focusing on expanding those, which is what R.L. Polk is. Its an expansion of our core sector," Key said.
The company, which also provides analysis and information on areas such as product design and environment, bought eight businesses last year, including CAPS, Displaybank, IMS Research and BDW Automotive.
"You'll see us continue to do some acquisition over the coming year as well," Key said.
Second-quarter net income fell to $42.9 million, or 65 cents per share, from $44.0 million, or 66 cents per share, a year earlier.
Excluding one-time items, the company, which competes with units of Thomson Reuters Corp (TRI.TO) (TRI.N), SAP (SAPG.DE), McGraw-Hill Companies Inc MHP.N, Accenture Plc (ACN.N) and Deloitte, earned $1.04 per share. Analysts expected $1.03 per share on average, according to Thomson Reuters I/B/E/S.
IHS also maintained its full-year, adjusted earnings forecast of $4.23-$4.43 per share on revenue of $1.66-$1.73 billion. Analysts expect $4.35 per share on revenue of $1.68 billion.
Shares of the company were down 7 percent at $100.67 on the New York Stock Exchange on Thursday.
(Reporting By Lehar Maan in Bangalore; Editing by Sreejiraj Eluvangal)