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What's in Store for TransUnion (TRU) this Earnings Season?

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Premium business service company TransUnion (TRU - Free Report) is scheduled to release third-quarter 2016 results before market opens on Oct 25. In the last reported quarter, the company’s earnings beat the Zacks Consensus Estimate by a penny for an earnings surprise of 3.13%. The average earnings surprise over the last four trailing quarters is a positive10.84%, beating estimates on all occasions.

Let’s see how things are shaping up prior to this announcement.

Factors to Consider

During the quarter, the company took over RTech (Healthcare Revenue Technologies, Inc) to enhance its healthcare business by leveraging data, technology and analytics to help healthcare providers make the most of its lucrative business potential. This is likely to generate incremental revenues during the impending quarter.

TransUnion also appointed a renowned solutions architect and strategic advisor with Tier1 Consulting Group, LLC, Henry Chao, to its Government Advisory Board. The inclusion of Chao as a member of the company’s Government Advisory Board is likely to enable the company to further expand its fraud and risk mitigation solutions in the public sector.

Toward the end of the third quarter, TransUnion entered into a strategic partnership with SavvyMoney, wherein both entities will work mutually to enhance their financial data analytical offerings to the customers. The deal is expected to help TransUnion’s consumers get personalized credit information services using SavvyMoney’s highly advanced credit system. Although the deal is likely to have minimal effect on the third quarter results, it is expected to attract favorable deals for the company in the future and augment its leading position in the market.

For the third-quarter, consolidated revenues are expected to come in the range of $420 million to $425 million, up about 9% to 10% from the prior-year quarter. Adjusted EBITDA for the quarter is likely to be in the range of $155–$158 million, an increase of about 11–13% from the prior-year quarter. Adjusted earnings per share are expected to be between 34–35 cents during the quarter, up 12–15% year over year.

However, TransUnion’s revenues are vulnerable to macroeconomic conditions such as interest rates, employment levels, consumer confidence, accessibility of affordable credit and capital, inflation and housing demand. Economic recovery has been weak so far and, consequently, consumer spending has been constrained. Factors like these are likely to limit the company’s growth prospects and adversely affect its financials.

TRANSUNION Price and EPS Surprise

 

TRANSUNION Price and EPS Surprise | TRANSUNION Quote

Earnings Whispers

Our proven model does not conclusively show that TransUnion is likely to beat earnings in the upcoming quarter results. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), #2 (Buy) or #3 (Hold) for an earnings beat. This is not the case here as we will see below.

Zacks ESP: Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is currently at 0.00%.

Zacks Rank: TransUnion carries a Zacks Rank #2. Though a favorable Zacks Rank increases the predictive power of ESP, the company’s 0.00% ESP makes surprise prediction uncertain.

Note that we caution against Sell-rated stocks (Zacks Rank #4 or #5) going into the earnings announcement, especially when the company is seeing a negative estimate revisions.

Stocks to Consider

Here are some companies you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Amazon.com, Inc. (AMZN - Free Report) , with an Earnings ESP of +10.47% and a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Navigant Consulting Inc. , with an Earnings ESP of +6.90% and a Zacks Rank #3.

ABB Ltd. , with an Earnings ESP of + 17.86 and a Zacks Rank #3.

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