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Equifax (EFX) Down 3.9% Since Earnings Report: Can It Rebound?

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It has been about a month since the last earnings report for Equifax, Inc. (EFX - Free Report) . Shares have lost about  3.9% in that time frame, outperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it 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 Q2 Earnings Top, Revenues Miss, Updates View

Equifax reported mixed results for second-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 $1.60 surpassed the Zacks Consensus Estimate of $1.57 and also jumped 11.9% year over year.

On a GAAP basis, the company reported earnings of $1.36 per share, up from the year-ago quarter tally of $1.08 per share. The strong year-over-year bottom-line growth can primarily be attributed to solid top-line performance and stringent cost management, which was partially offset by a marginal increase in the number of total outstanding shares.

Details of the Quarter

Equifax’s revenues of $856.7 million lagged the Zacks Consensus Estimate of $861 million as well as management’s guided range of $857–$862 million. However, the figure was up 6% on a year-over-year basis.

According to Richard F. Smith, Chairman and Chief Executive Officer at Equifax, "Second quarter performance reflects outstanding execution by the team and the strength of our unique portfolio of businesses."

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.

Segment wise, total USIS revenues were up 8% year over year to $331.9 million. Among its sub-segments, growth was recorded in Online Information Solutions (6%), Mortgage Solutions Services (10%) and Financial Marketing Services (15%).

International revenues (including Europe, the Asia Pacific, Canada and Latin America) advanced 6% year over year to $231.4 million. On a constant-currency basis, revenues increased 10%. Growth was mainly driven by the Veda Group acquisition, which increased the Asia-Pacific region’s contribution to revenues to $76.5 million, up 6% year over year. Moreover, revenues registered an increase of 13%, 4% and 2% in Latin America, Canada and Europe, respectively.

Revenues from the Workforce Solutions segment climbed 10% year over year to $194.5 million, primarily on the back of 19% revenue growth in Verification Services, which more-than offset 5% decline in Employer Services.

Global Consumer Solutions contributed $98.9 million to total revenue, reflecting an 8% year-over-year decline. On a constant-currency basis, revenues dropped 7%.

Operating Results

Equifax’s adjusted EBITDA increased approximately 13% to $334.7 million. Consequently, adjusted operating EBITDA margin expanded 250 basis points (bps) to 39.1%. Adjusted net income came in at $194.8 million or $1.60 per share compared with $172.7 million or $1.43 per share reported a year ago.

Balance Sheet & Cash Flow

Equifax exited the quarter with $403.9 million in cash and cash equivalents, up from the previous quarter’s balance of $123.2 million. Total long-term debt (excluding current portion) was $2.04 billion, flat quarter over quarter. During six months ended Jun 30, 2017, Equifax generated cash flow of $329.1 million from operational activities. The company paid 39 cents per share as dividends in the second quarter.

Guidance

For the quarter, Equifax projects revenues in a range of $853–$861 million (mid-point: $857 million). Adjusted earnings per share are projected to be between $1.50 and $1.54 (midpoint: $1.52).

Furthermore, Equifax updated full-year 2017 outlook. The company now expects revenues in the range of $3.395–$3.425 billion (previous guidance $3.375–$3.425 billion). Adjusted earnings per share are now anticipated to be between $6.02 and $6.10 (previous guidance $5.96 and $6.10).

How Have Estimates Been Moving Since Then?

Analysts were quiet during the past month as none of them issued any earnings estimate revisions.

Equifax, Inc. Price and Consensus

 

Equifax, Inc. Price and Consensus | Equifax, Inc. Quote

VGM Scores

At this time, the stock has an average Growth Score of C, while its Momentum is lagging a bit with a D. Charting the exact same path, 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 D. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is solely suitable for growth investors.

Outlook

The stock has a Zacks Rank #3 (Hold). We are looking for an inline return from the stock in the next few months.




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