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Equifax (EFX) Poised for Long-Term Growth Despite Headwinds
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Equifax Inc. (EFX - Free Report) is a leading information services provider to consumers and businesses. The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and robust fundamentals.
Equifax’s share price movement has been quite favorable. In the year so far, its shares gained 15.1%, while the Zacks categorized Financial Transaction Services industry returned 9.6%.
For the last few years Equifax has been focusing on expanding its international footprint. Last year in September, the company opened a second office in Dublin, and employed more than 100 people at the new facility.
Apart from this, the company resorted to acquisitions and joint ventures to drive growth. In Feb 2016, Equifax acquired Australia-based data and analytic services provider – Veda – for a cash consideration of approximately $1.7 billion (2.4 billion Australian dollars). Veda has been integrated into the newly created Asia-Pacific reporting unit within the International segment.
Notably, international revenues (including Europe, the Asia Pacific, Canada and Latin America) surged 49% year over year to $212.4 million in fourth-quarter 2016. On a constant-currency basis, revenues soared 62%. The Veda buyout bolstered the Asia-Pacific revenues from $2.6 million in fourth-quarter 2015 to $70.7 million in fourth-quarter 2016.
Furthermore, Equifax remains enthusiastic about forming joint ventures that could expand its business internationally. Joint ventures keep operating costs down and need no integration time while diversifying the revenue source. To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A., the second largest consumer credit bureau in Brazil.
Equifax also owns roughly 50% in Russia-based credit reporting agency, Global Payments Credit Services LLC, and 49% interest in the Indian credit reporting agency, Equifax Credit Information Services Private Limited (a joint venture between Equifax and 6 Indian financial institutions). The company expects its investments in the joint ventures to yield desired results and help it to register solid growth over the long term.
Bottom Line
Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and consistent share gains in North America, should prove to be tailwinds. Also, the company’s strong correlation with the consumer and financial markets, and exposure in the U.S. and Europe are likely to propel growth, going ahead.
The ongoing initiatives have helped the company to post splendid financial results for the last quarter. Equifax’s top- and bottom-line results for fourth-quarter 2016 not only came ahead of estimates, but also marked solid year-over-year improvement. Moreover, its optimistic full-year guidance for revenues and earnings indicates that its growth initiatives are aimed in the right direction.
Nonetheless, we anticipate the company’s investments in new initiatives to weigh on its bottom-line results in the near term. Additionally, uncertainty surrounding IT spending and the strengthening U.S. dollar are some concerns. Further, increasing competition from the likes of Fiserv and Total System Services are the other factors likely to affect earnings in the near term.
Green Dot witnessed upward estimate revision for 2017 and 2018 in the last 30 days, and has an expected long-term EPS growth rate of 15%.
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Equifax (EFX) Poised for Long-Term Growth Despite Headwinds
Equifax Inc. (EFX - Free Report) is a leading information services provider to consumers and businesses. The company is on a growth trajectory, gathering momentum from its positive earnings surprise history and robust fundamentals.
Equifax’s share price movement has been quite favorable. In the year so far, its shares gained 15.1%, while the Zacks categorized Financial Transaction Services industry returned 9.6%.
For the last few years Equifax has been focusing on expanding its international footprint. Last year in September, the company opened a second office in Dublin, and employed more than 100 people at the new facility.
Apart from this, the company resorted to acquisitions and joint ventures to drive growth. In Feb 2016, Equifax acquired Australia-based data and analytic services provider – Veda – for a cash consideration of approximately $1.7 billion (2.4 billion Australian dollars). Veda has been integrated into the newly created Asia-Pacific reporting unit within the International segment.
Notably, international revenues (including Europe, the Asia Pacific, Canada and Latin America) surged 49% year over year to $212.4 million in fourth-quarter 2016. On a constant-currency basis, revenues soared 62%. The Veda buyout bolstered the Asia-Pacific revenues from $2.6 million in fourth-quarter 2015 to $70.7 million in fourth-quarter 2016.
Furthermore, Equifax remains enthusiastic about forming joint ventures that could expand its business internationally. Joint ventures keep operating costs down and need no integration time while diversifying the revenue source. To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A., the second largest consumer credit bureau in Brazil.
Equifax also owns roughly 50% in Russia-based credit reporting agency, Global Payments Credit Services LLC, and 49% interest in the Indian credit reporting agency, Equifax Credit Information Services Private Limited (a joint venture between Equifax and 6 Indian financial institutions). The company expects its investments in the joint ventures to yield desired results and help it to register solid growth over the long term.
Bottom Line
Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and consistent share gains in North America, should prove to be tailwinds. Also, the company’s strong correlation with the consumer and financial markets, and exposure in the U.S. and Europe are likely to propel growth, going ahead.
The ongoing initiatives have helped the company to post splendid financial results for the last quarter. Equifax’s top- and bottom-line results for fourth-quarter 2016 not only came ahead of estimates, but also marked solid year-over-year improvement. Moreover, its optimistic full-year guidance for revenues and earnings indicates that its growth initiatives are aimed in the right direction.
Nonetheless, we anticipate the company’s investments in new initiatives to weigh on its bottom-line results in the near term. Additionally, uncertainty surrounding IT spending and the strengthening U.S. dollar are some concerns. Further, increasing competition from the likes of Fiserv and Total System Services are the other factors likely to affect earnings in the near term.
Currently, Equifax has a Zacks Rank #3 (Hold).
A better-ranked stock in the Financial Transaction Services industry is Green Dot Corporation (GDOT - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Green Dot witnessed upward estimate revision for 2017 and 2018 in the last 30 days, and has an expected long-term EPS growth rate of 15%.
Zacks’ Best Private Investment Ideas
While we are happy to share many articles like this on the website, our best recommendations and most in-depth research are not available to the public.
Starting today, for the next month, you can follow all Zacks' private buys and sells in real time. Our experts cover all kinds of trades… from value to momentum . . . from stocks under $10 to ETF and option moves . . . from stocks that corporate insiders are buying up to companies that are about to report positive earnings surprises. You can even look inside exclusive portfolios that are normally closed to new investors. Click here for Zacks' private trades >>