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Equifax Inc. (EFX - Analyst Report) reported first-quarter 2014 adjusted earnings per share from continuing operations of 89 cents, which came ahead of the Zacks Consensus Estimate by a couple of cents. Earnings were up 2.3% from the year-ago quarter.

Quarter Details

Despite increasing 3.2% year over year, Equifax’s revenues of $584.5 million lagged the Zacks Consensus Estimate of $588 million. The year-over-year increase resulted from revenue growth in most of its business segments.

Segment-wise, total U.S. Consumer Information Solutions revenues were down 0.5% from the year-ago quarter to $243.9 million. Among sub-segments, growth was recorded in the Consumer Financial Marketing Services segment (up 3%) and Online Consumer Information Solutions (up 2%), which was offset by an 18.0% revenue decline in the Mortgage Solutions Services.

International revenues (including Europe, Canada and Latin America) grew 16% year over year to $143.9 million, primarily due to 39% growth in the Europe segment which more than offset the 4% decline in revenues from Canada Consumer segment. Revenues from Latin America remained flat. Revenues from Europe included revenues of Equifax’s recently acquired company, TDX Group in the U.K.

Revenues from the Workforce Solutions segment fell 3% on a year-over-year basis to $119.7 million, primarily due to a 7% decline in revenues from Verification Services which more than offset a 1% increase in revenues from Employer Services.

North American Personal Solutions contributed $54.1 million to revenues, reflecting a 6% year-over-year improvement. North American Commercial Solutions generated $22.9 million of revenues, remained flat on a year-over-year basis. Revenues from Forseva, Equifax’s recent acquisition, were included in this segment.

Equifax’s operating margins came in at 26% compared to 26.3% reported in the year-ago quarter, primarily due to the effect of the acquisitions. Adjusted net income came in at $110.9 million or 89 cents per share compared with $107.6 million or 87 cents reported in the year-ago quarter.

Equifax exited the quarter with $101.4 million in cash and cash equivalents, compared to $235.9 million in the previous quarter. Total long-term debt (including current portion) stood at $1.63 billion. During the quarter, the company paid dividends of $30.7 million and repurchased stocks worth $24.4 million.

Guidance

Considering the recent domestic and international business activities, current foreign exchange rates and the expected slowdown in mortgage activities in the first half of 2014, management expects revenues from the second quarter to range between $606 million and $619 million (mid-point $612.5 million), while the Zacks Consensus Estimate is pegged at $614 million. Earnings are forecasted between 92 cents and 95 cents (mid-point 93.5 cents). The Zacks Consensus Estimate is pegged at 95 cents.

Our Take

Equifax reported mixed first-quarter results. While Equifax’s bottom line beat the Zacks Consensus Estimate, the top line fell short of the same. Nonetheless, the company’s revenues increased on a year-over-year basis aided by strong growth across most its business segments.

Management’s efforts such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America were encouraging.

Given the company’s strong correlation to consumer and financial markets as well as its U.S. and European exposure, we see a gradual improvement in results. Moreover, improving mortgage environment could be a positive for the stock. However, stiff competition from Automatic Data Processing Inc. (ADP - Analyst Report), Fiserv Inc. (FISV - Analyst Report), Moody’s Corp. (MCO - Analyst Report) and uncertainty in the mortgage sector are concerns.

Currently, Equifax has a Zacks Rank #3 (Hold).

Read the Full Research Report on ADP
Read the Full Research Report on FISV
Read the Full Research Report on MCO
Read the Full Research Report on EFX


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