Expect Equifax to Perform In-Line

Equifax, Inc. (EFX - Analyst Report) is finding new avenues for growth in the international, personal and commercial solution businesses, while its U.S. consumer information solution business is also showing signs of improvement. The company’s growing reliance on subscription income provides a steady revenue stream, and the TALX acquisition is accretive to its earnings. Based on the company’s year-to-date performance, current market trends and management's expectations -- as well as a weak U.S. economic environment -- Equifax expects consolidated annual revenue growth to be in the range of 9% to 12% for full-year 2008.

Management expects adjusted EPS in the range of $2.48 to $2.58. However, continued weakness in mortgage activity has resulted in a 7.8% decline in mortgage-related revenues in 2007. Shares of Equifax are currently trading at a P/E multiple of 13.7x our 2008 EPS estimate of $2.54. This multiple is a discount to its peer group. Though the acquisition of TALX Corporation is expected to expand margins, this will come with increased execution risk.

We believe that the stock will perform in line with the broader equity market over the near-term. Over the last six years, EFX has traded in a range of 14x to 20x forward earnings. Given the challenging market for equities, we continue to expect that the stock will trade at the low-end of this range.

Thus, we maintain a Hold recommendation on EFX shares with a six-month target price of $36.50 given its sensitivity to the credit market. Our new target price of $36.50 represents a multiple of 14.4x our 2008 EPS estimate, a discount to the industry mean and S&P 500.

Read the full analyst report on EFX.