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Why Is TransUnion (TRU) Up 13.8% Since Its Last Earnings Report?

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A month has gone by since the last earnings report for TransUnion (TRU - Free Report) . Shares have added about 13.8% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is TRU due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Recent Earnings

TransUnion reported better-than-expected first-quarter 2018 results.

Adjusted earnings of 57 cents surpassed the Zacks Consensus Estimate by 6 cents and improved 36% year over year. Lower tax rate, resulting from Tax Cuts and Jobs Act, significantly benefited the company’s earnings in the reported quarter.

Total revenues of $537 surpassed the consensus mark by 6.1% and were up 18% (17% on a constant-currency basis). The improvement was driven by strong double-digit growth in each of the operating segments — U.S. Information Services (USIS), International and Consumer Interactive — positive contribution from acquisitions of DataLink services, FactorTrust and eBureau  as well as contribution from incremental credit monitoring business from a competitor.

Revenues by Operating Segments

The U.S. Information Services revenues of $342 million were up 21% year over year driven by strong performance in all the three platforms within the segment. Online Data Services, Marketing Services and Decision Services revenues of $228 million, $52 million and $63 million were up 25%, 23% and 8% respectively, on a year-over-year basis. International revenues surged 15% year over year to $96 million driven by strength in both developed and emerging markets. Within the segment, developed market revenues of $31 million increased 12% (8% on a constant-currency basis). Emerging market revenues of $65 million was up 17% (13% constant currency). Revenues at the Consumer Interactive segment improved 12% from the prior-year quarter to $118 million, aided by strong growth in both direct and indirect channels.

Margins

Adjusted EBITDA was $203 million, up 18% (17% on a constant-currency basis) year over year. Meanwhile, adjusted EBITDA margin remained flat at 37.7% mainly because of two reasons. First, roughly two-thirds of the incremental monitoring revenues from a competitor were used in advertising, marketing and litigation in the company’s international segment. Second, the company incurred significant cost related to three acquisitions namely DataLink services, FactorTrust and eBureau. Total adjusted operating income was $173 million, up 17% from the year-ago quarter, primarily owing to top-line growth. Total adjusted operating margin contracted 30 basis points to 32.1% in the quarter.

Balance Sheet and Cash Flow

TransUnion had $154.3 million in cash and cash equivalents at the end of the first quarter compared with $115.8 million in the prior quarter. Long-term debt was $2,334.7 million compared with $2,345.3 million in the prior quarter. The company generated $101 million in cash from operating activities and spent 26.9 million on capex.

2Q18 Outlook

For the second quarter of 2018, TransUnion expects revenues between $534 million and $539 million, an improvement of 12-13% year over year on a constant-currency basis. The Zacks Consensus Estimate is pegged at $525.4 million. Adjusted EBITDA is envisioned to be in the range of $208-$211 million, an increase of 12-14%. Adjusted earnings per share including a benefit of roughly 7 cents owing to Tax Cuts and Jobs Act, is expected between 59 and 60 cents, a rise of 26-29%. The Zacks Consensus Estimate for earnings is pegged at 57 cents.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been seven revisions higher for the current quarter.

TransUnion Price and Consensus

VGM Scores

At this time, TRU has a strong Growth Score of A, though it is lagging a bit on the momentum front with a B. However, the stock was also allocated a grade of F on the value side, putting it in the fifth quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate that the stock is more suitable for growth investors than momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise TRU has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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