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Equifax (EFX) Q1 Earnings and Revenues Beat, Guides Soft
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Keeping its earnings streak alive for the ninth time in a row, Equifax Inc. (EFX - Free Report) reported better-than-expected results for first-quarter 2017. 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 $1.41 and also jumped 16.8% year over year.
On a GAAP basis, the company reported earnings of $1.26 per share, up from the year-ago quarter tally of 85 cents. The strong year-over-year bottom-line growth was mainly stemmed by solid top-line performance and stringent cost management, which was partially offset by a marginal increase in the number of total outstanding shares.
Despite this, shares dropped over 4% in the after-hour trade as the company’s second-quarter revenue guidance fell short of analysts’ estimates. Notably, the stock’s share movement has been almost in line with the Zacks categorized Financial Transaction Services industry in the past one-year period. Equifax gained 16.9% during the said period compared with the industry’s return of 16%.
Revenues
Equifax’s revenues of $832.2 million came ahead of the Zacks Consensus Estimate of $825 million as well as management’s guided range of $822–$826 million (mid-point $824 million). The figure was also up 14.3% 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 5% year over year to $310.1 million. Among its sub-segments, growth was recorded in Online Information Solutions (3%), Mortgage Solutions Services (22%) and Financial Marketing Services (2%).
International revenues (including Europe, the Asia Pacific, Canada and Latin America) surged 37% year over year to $216.6 million. On a constant-currency basis, revenues soared 41%. Growth was mainly driven by the Veda Group acquisition, which increased the Asia-Pacific region’s contribution to revenues to $72 million from $27.6 million. Moreover, revenues registered an increase of 20%, 15% and 2% in Latin America, Canada and Europe, respectively.
Revenues from the Workforce Solutions segment climbed 11% year over year to $200 million, primarily on the back of 16% revenue growth in Verification Services and 5% in Employer Services.
Global Consumer Solutions contributed $105.9 million to total revenue, reflecting an 11% year-over-year jump.
Operating Results
Equifax’s adjusted operating income increased approximately 22.7% to $273.2 million. Consequently, adjusted operating margin expanded 220 basis points (bps) to 32.8%. Adjusted net income came in at $175.5 million or $1.44 per share compared with $148.9 million or $1.23 per share reported a year ago.
Equifax exited the quarter with $123.2 million in cash and cash equivalents, down from the previous quarter’s balance of $129.3 million. Total long-term debt (excluding current portion) was $2.04 billion, down from $2.09 billion at the end of fourth-quarter 2016. During the quarter, Equifax generated cash flow of $103.7 million from operational activities. The company paid $46.9 million as dividends in the first quarter.
Guidance
Despite reporting strong first-quarter results, Equifax provided a soft guidance for the second quarter. For the quarter, Equifax projects revenues in a range of $857–$862 million (mid-point: $859.5 million), while the Zacks Consensus Estimate is pegged at $864.17 million. Adjusted earnings per share are projected to be between $1.55 and $1.58 (midpoint: $1.565). The earnings guidance range at its mid-point is also lower than the Zacks Consensus Estimate of $1.58.
Furthermore, Equifax reiterated its full-year 2017 outlook. The company continues to expect revenues in the range of $3.375–$3.425 billion (mid-point $3.40 billion). The revenue outlook at the mid-point is higher than the Zacks Consensus Estimate of $3.39 billion. Adjusted earnings per share are still anticipated to be between $5.96 and $6.10 (midpoint: $6.03). The Zacks Consensus Estimate is pegged at $6.06.
Our Take
Equifax posted better-than-expected results for the first quarter. Earnings and revenues both recorded year-over-year growth. However, the company provided a soft outlook for the second quarter.
Nonetheless, we believe that management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should act as 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, moving ahead.
However, we expect the company’s investments in new initiatives to weigh on its upcoming quarterly earnings. Additionally, uncertainty surrounding IT spending and the strengthening U.S. dollar are some concerns. Moreover, 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 has a long-term EPS growth rate of 15% compared with the industry’s average growth rate of 12.8%.
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Equifax (EFX) Q1 Earnings and Revenues Beat, Guides Soft
Keeping its earnings streak alive for the ninth time in a row, Equifax Inc. (EFX - Free Report) reported better-than-expected results for first-quarter 2017. 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 $1.41 and also jumped 16.8% year over year.
On a GAAP basis, the company reported earnings of $1.26 per share, up from the year-ago quarter tally of 85 cents. The strong year-over-year bottom-line growth was mainly stemmed by solid top-line performance and stringent cost management, which was partially offset by a marginal increase in the number of total outstanding shares.
Despite this, shares dropped over 4% in the after-hour trade as the company’s second-quarter revenue guidance fell short of analysts’ estimates. Notably, the stock’s share movement has been almost in line with the Zacks categorized Financial Transaction Services industry in the past one-year period. Equifax gained 16.9% during the said period compared with the industry’s return of 16%.
Revenues
Equifax’s revenues of $832.2 million came ahead of the Zacks Consensus Estimate of $825 million as well as management’s guided range of $822–$826 million (mid-point $824 million). The figure was also up 14.3% 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 5% year over year to $310.1 million. Among its sub-segments, growth was recorded in Online Information Solutions (3%), Mortgage Solutions Services (22%) and Financial Marketing Services (2%).
International revenues (including Europe, the Asia Pacific, Canada and Latin America) surged 37% year over year to $216.6 million. On a constant-currency basis, revenues soared 41%. Growth was mainly driven by the Veda Group acquisition, which increased the Asia-Pacific region’s contribution to revenues to $72 million from $27.6 million. Moreover, revenues registered an increase of 20%, 15% and 2% in Latin America, Canada and Europe, respectively.
Revenues from the Workforce Solutions segment climbed 11% year over year to $200 million, primarily on the back of 16% revenue growth in Verification Services and 5% in Employer Services.
Global Consumer Solutions contributed $105.9 million to total revenue, reflecting an 11% year-over-year jump.
Operating Results
Equifax’s adjusted operating income increased approximately 22.7% to $273.2 million. Consequently, adjusted operating margin expanded 220 basis points (bps) to 32.8%. Adjusted net income came in at $175.5 million or $1.44 per share compared with $148.9 million or $1.23 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 $123.2 million in cash and cash equivalents, down from the previous quarter’s balance of $129.3 million. Total long-term debt (excluding current portion) was $2.04 billion, down from $2.09 billion at the end of fourth-quarter 2016. During the quarter, Equifax generated cash flow of $103.7 million from operational activities. The company paid $46.9 million as dividends in the first quarter.
Guidance
Despite reporting strong first-quarter results, Equifax provided a soft guidance for the second quarter. For the quarter, Equifax projects revenues in a range of $857–$862 million (mid-point: $859.5 million), while the Zacks Consensus Estimate is pegged at $864.17 million. Adjusted earnings per share are projected to be between $1.55 and $1.58 (midpoint: $1.565). The earnings guidance range at its mid-point is also lower than the Zacks Consensus Estimate of $1.58.
Furthermore, Equifax reiterated its full-year 2017 outlook. The company continues to expect revenues in the range of $3.375–$3.425 billion (mid-point $3.40 billion). The revenue outlook at the mid-point is higher than the Zacks Consensus Estimate of $3.39 billion. Adjusted earnings per share are still anticipated to be between $5.96 and $6.10 (midpoint: $6.03). The Zacks Consensus Estimate is pegged at $6.06.
Our Take
Equifax posted better-than-expected results for the first quarter. Earnings and revenues both recorded year-over-year growth. However, the company provided a soft outlook for the second quarter.
Nonetheless, we believe that management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should act as 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, moving ahead.
However, we expect the company’s investments in new initiatives to weigh on its upcoming quarterly earnings. Additionally, uncertainty surrounding IT spending and the strengthening U.S. dollar are some concerns. Moreover, 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 (Sell).
A better-ranked stock in the financial transaction services industry is Green Dot Corp. (GDOT - Free Report) , which carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Green Dot has a long-term EPS growth rate of 15% compared with the industry’s average growth rate of 12.8%.
The Best & Worst of Zacks
Today you are invited to download the full, up-to-the-minute list of 220 Zacks Rank #1 ""Strong Buys"" free of charge. From 1988 through 2015 this list has averaged a stellar gain of +25% per year. Plus, you may download 220 Zacks Rank #5 ""Strong Sells."" Even though this list holds many stocks that seem to be solid, it has historically performed 6X worse than the market. See these critical buys and sells free >>