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Keeping its earnings streak alive for the seventh time in a row, Equifax Inc. (EFX - Free Report) reported better-than-expected results in the third quarter of 2016. The company’s adjusted earnings (excluding amortization expenses, Veda Group acquisition-related charges and other one-time items) per share from continuing operations of $1.44 surpassed the Zacks Consensus Estimate of $1.36 and surged 26% year over year.
On a GAAP basis, the company reported earnings of $1.09 per share, up from the year-ago quarter tally of 98 cents. The strong year-over-year bottom-line growth was mainly aided by solid top-line performance and stringent cost management, which was partially offset by a slight increase in the number of total outstanding shares.
The overwhelming third-quarter results boosted investors’ confidence as shares gained 1.5% in after hour trade.
Equifax’s revenues of $804.1 million came ahead of the Zacks Consensus Estimate of $801 million and were toward the higher-end of management’s guided range of $795–$805 million (mid-point $800 million). The figure was also up 20.5% on a year-over-year basis.
The company made slight changes in its reportable segments from first-quarter 2016. The U.S. Information Solutions (USIS) and Workforce Solutions remained unchanged, while Personal Solutions was renamed to Global Consumer Solutions. Under the International segment, Equifax has “created a new Asia Pacific reporting unit, including the Veda acquisition as well as TDX Australia and India operations, which previously were part of the Europe reporting unit.”
Segment-wise, total USIS revenues were up 9% year over year to $317.4 million. Among its sub-segments, growth was recorded in Online Information Solutions (7%), Mortgage Solutions Services (24%) and Financial Marketing Services (3%).
International revenues (including Europe, the Asia-Pacific, Canada and Latin America) surged 47% year over year to $214.3 million. On a constant-currency basis, revenues soared 60%. Growth was mainly driven by the Veda Group acquisition, which increased the Asia-Pacific region’s contribution to revenues to $73.6 million from $2.3 million. Moreover, the company registered an increase of 2% in Europe and 4% in Canada. However, revenues from Latin America dropped 9%.
Revenues from the Workforce Solutions segment surged 23% year over year to $171.3 million, primarily on the back of 23% revenue growth registered in both, Verification Services as well as Employer Services.
Global Consumer Solutions contributed $101.1 million to total revenue, reflecting a 12% year-over-year jump.
Operating Results
Equifax’s adjusted operating income increased approximately 30% to $265.9 million. Consequently, adjusted operating margin expanded 240 basis points (bps) to 34.4%. Adjusted net income came in at $175.2 million or $1.44 per share, compared with $137.6 million or $1.14 per share reported a year ago.
Equifax exited the quarter with $111.5 million in cash and cash equivalents, up from the previous quarters’ balance of $96.8 billion. Total long-term debt (excluding current portion) was $2.14 billion, down from $2.5 billion at the end of second-quarter 2016. During the first three quarters of 2016, Equifax generated cash flow of $524.5 million from operational activities. The company paid $118.1 million as dividends in the first nine months of 2016.
Guidance
Buoyed by strong third-quarter results, Equifax raised its earnings guidance for the full year. Adjusted earnings per share are now forecast to be between $5.45 and $5.48 (midpoint: $5.465), compared with the previous projection of $5.35–$5.40 (midpoint: $5.375). The earnings guidance range is significantly above the Zacks Consensus Estimate of $5.31.
However, Equifax now expects revenues to be slightly over $3.14 billion, which is lower than the mid-point of its earlier projection of $3.13–$3.16 billion (mid-point $3.15). Moreover, the revenue outlook is also lower than the Zacks Consensus Estimate of $3.15 billion.
Coming to the fourth-quarter outlook, Equifax projects revenues in the range of $797 million to $801 million (midpoint: $799 million), while the Zacks Consensus Estimate is pegged at $806.9 million. Adjusted earnings per share are projected to be between $1.35 and $1.38 (midpoint: $1.365). The Zacks Consensus Estimate is pegged at $1.37.
Our Take
Equifax posted better-than-expected results for the third quarter. Earnings and revenues both recorded year-over–year growth. Moreover, its upbeat full-year guidance for earnings indicates that its growth initiatives are aimed in the right direction.
Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should prove to be tailwinds. Also, the company’s strong correlation with the consumer and financial markets as well as exposure in the U.S. and Europe are likely to propel growth, going ahead.
However, competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) , Fiserv Inc. and Moody’s Corp. (MCO - Free Report) , along with uncertainty in the mortgage sector, raises concerns.
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Equifax (EFX) Q3 Earnings & Revenues Top; Lifts '16 View
Keeping its earnings streak alive for the seventh time in a row, Equifax Inc. (EFX - Free Report) reported better-than-expected results in the third quarter of 2016. The company’s adjusted earnings (excluding amortization expenses, Veda Group acquisition-related charges and other one-time items) per share from continuing operations of $1.44 surpassed the Zacks Consensus Estimate of $1.36 and surged 26% year over year.
On a GAAP basis, the company reported earnings of $1.09 per share, up from the year-ago quarter tally of 98 cents. The strong year-over-year bottom-line growth was mainly aided by solid top-line performance and stringent cost management, which was partially offset by a slight increase in the number of total outstanding shares.
The overwhelming third-quarter results boosted investors’ confidence as shares gained 1.5% in after hour trade.
Revenues
Equifax’s revenues of $804.1 million came ahead of the Zacks Consensus Estimate of $801 million and were toward the higher-end of management’s guided range of $795–$805 million (mid-point $800 million). The figure was also up 20.5% on a year-over-year basis.
The company made slight changes in its reportable segments from first-quarter 2016. The U.S. Information Solutions (USIS) and Workforce Solutions remained unchanged, while Personal Solutions was renamed to Global Consumer Solutions. Under the International segment, Equifax has “created a new Asia Pacific reporting unit, including the Veda acquisition as well as TDX Australia and India operations, which previously were part of the Europe reporting unit.”
Segment-wise, total USIS revenues were up 9% year over year to $317.4 million. Among its sub-segments, growth was recorded in Online Information Solutions (7%), Mortgage Solutions Services (24%) and Financial Marketing Services (3%).
International revenues (including Europe, the Asia-Pacific, Canada and Latin America) surged 47% year over year to $214.3 million. On a constant-currency basis, revenues soared 60%. Growth was mainly driven by the Veda Group acquisition, which increased the Asia-Pacific region’s contribution to revenues to $73.6 million from $2.3 million. Moreover, the company registered an increase of 2% in Europe and 4% in Canada. However, revenues from Latin America dropped 9%.
Revenues from the Workforce Solutions segment surged 23% year over year to $171.3 million, primarily on the back of 23% revenue growth registered in both, Verification Services as well as Employer Services.
Global Consumer Solutions contributed $101.1 million to total revenue, reflecting a 12% year-over-year jump.
Operating Results
Equifax’s adjusted operating income increased approximately 30% to $265.9 million. Consequently, adjusted operating margin expanded 240 basis points (bps) to 34.4%. Adjusted net income came in at $175.2 million or $1.44 per share, compared with $137.6 million or $1.14 per share reported a year ago.
EQUIFAX INC Price, Consensus and EPS Surprise
EQUIFAX INC Price, Consensus and EPS Surprise | EQUIFAX INC Quote
Balance Sheet & Cash Flow
Equifax exited the quarter with $111.5 million in cash and cash equivalents, up from the previous quarters’ balance of $96.8 billion. Total long-term debt (excluding current portion) was $2.14 billion, down from $2.5 billion at the end of second-quarter 2016. During the first three quarters of 2016, Equifax generated cash flow of $524.5 million from operational activities. The company paid $118.1 million as dividends in the first nine months of 2016.
Guidance
Buoyed by strong third-quarter results, Equifax raised its earnings guidance for the full year. Adjusted earnings per share are now forecast to be between $5.45 and $5.48 (midpoint: $5.465), compared with the previous projection of $5.35–$5.40 (midpoint: $5.375). The earnings guidance range is significantly above the Zacks Consensus Estimate of $5.31.
However, Equifax now expects revenues to be slightly over $3.14 billion, which is lower than the mid-point of its earlier projection of $3.13–$3.16 billion (mid-point $3.15). Moreover, the revenue outlook is also lower than the Zacks Consensus Estimate of $3.15 billion.
Coming to the fourth-quarter outlook, Equifax projects revenues in the range of $797 million to $801 million (midpoint: $799 million), while the Zacks Consensus Estimate is pegged at $806.9 million. Adjusted earnings per share are projected to be between $1.35 and $1.38 (midpoint: $1.365). The Zacks Consensus Estimate is pegged at $1.37.
Our Take
Equifax posted better-than-expected results for the third quarter. Earnings and revenues both recorded year-over–year growth. Moreover, its upbeat full-year guidance for earnings indicates that its growth initiatives are aimed in the right direction.
Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should prove to be tailwinds. Also, the company’s strong correlation with the consumer and financial markets as well as exposure in the U.S. and Europe are likely to propel growth, going ahead.
However, competition from the likes of Automatic Data Processing Inc. (ADP - Free Report) , Fiserv Inc. and Moody’s Corp. (MCO - Free Report) , along with uncertainty in the mortgage sector, raises concerns.
Currently, Equifax has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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