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Why Is Equifax (EFX) Down 8.6% Since Last Earnings Report?

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A month has gone by since the last earnings report for Equifax (EFX - Free Report) . Shares have lost about 8.6% in that time frame, underperforming the S&P 500.

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

Equifax Tops Q2 Earnings and Revenue Estimates

Equifax reported better-than-expeted second-quarter 2020 results.

Adjusted earnings of $1.60 per share beat the Zacks Consensus Estimate by 22.1% and improved 14.3% on a year-over-year basis. The reported figure exceeded the guided range of 78-88 cents.

Revenues of $982.8 million outpaced the consensus estimate by 6.4% and improved 12% year over year on a reported basis and 13% on a local-currency basis. The reported figure exceeded the guided range of $785-$805 million.

Segmental Revenues

Revenues in the U.S. Information Solutions division came in at $365.6 million, up 10% from the year-ago quarter. Within the division, Online Information Solutions’ revenues of $262.9 million were up 7% year over year. Mortgage Solutions’ revenues of $51.2 million improved 44% year over year. Financial Marketing Services’ revenues came in at $51.5 million, up 1% year over year. The segment contributed 37% of total revenues.

Revenues in the International division totaled $180.5 million, down 21% year over year on a reported basis and 15% on a local-currency basis. Asia Pacific revenues of $65.2 million declined 14% year over year on a reported basis and 9% on a local-currency basis. Revenues from Europe came in at $48 million, which decreased 27% year over year on a reported basis and 25% on a local-currency basis. Latin America revenues of $34.2 million declined 28% year over year on a reported basis and 14% on a local-currency basis. Canada revenues of $33.1 million declined 16% year over year on a reported basis and 13% on a local-currency basis. The International segment contributed 18% of total revenues.

Revenues in the Workforce Solutions segment totaled $352.9 million, up 53% from the year-ago quarter’s figure. Within the segment, Verification Services’ revenues of $251.9 million were up 46% year over year. Employer Services revenues of $101 million were up 75% year over year. Workforce Solutions contributed 36% of total revenues.

Revenues in the Global Consumer Solutions segment amounted to $83.8 million, down 5% year over year on both reported and local-currency basis. The segment contributed 9% of total revenues.

Operating Results

Adjusted EBITDA in the second quarter of 2020 came in at $353.2 million compared with $296.2 million in the year-ago quarter. Adjusted EBITDA margin rose to 35.9% from 33.7% in the year-ago quarter.

Adjusted EBITDA margin for USIS was 44.7% compared with 42.9% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 27.8% compared with 25.3% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 51.5% compared with 49.4% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 23.1% compared with 23.9% in the year-ago quarter.

Balance Sheet and Cash Flow

Equifax exited second-quarter 2020 with cash and cash equivalents of $1.35 billion compared with $369.9 million at the end of the prior quarter. Long-term debt was $3.87 billion compared with $3.51 billion at the end of the prior quarter.

The company generated $251.2 million of cash from operating activities and capex was $104.8 million. Also, Equifax paid out dividends of $47.3 million to shareholders in the reported quarter.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 18.82% due to these changes.

VGM Scores

Currently, Equifax has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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.

Outlook

Estimates have been trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Equifax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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