Back to top

Will Cybersecurity Woes Dent Equifax (EFX) Earnings in Q2?

Read MoreHide Full Article

Equifax Inc. (EFX - Free Report) is scheduled to report second-quarter 2018 results on Jul 25, after the bell.

We expect the company’s International and Workforce Solutions segments to deliver impressive results in the to-be-reported quarter. The USIS and Global Consumer Solutions segments are expected to remain weak.

Further, costs related to IT and data security projects, and professional fees incurred to address litigation claims pertaining to the cybersecurity incident are likely to weigh on the company’s bottom-line performance.

In a year’s time, shares of Equifax have declined 12.5% against the 35.8% rally of the industry it belongs to.

Here are the expectations in detail.

Segmental Performance

Revenues from the International segment are expected to increase backed by expanding data and machine learning-based analytics solutions, increased coverage in fraud prevention market and growing potential in debt management across the world. The segment has long been a very strong performer in new product innovation (NPI). The Zacks Consensus Estimate for this segment’s revenues is pegged at $261 million, reflecting 13% year-over-year growth. In the first quarter, revenues at this segment advanced 13% year over year to $244.5 million.

Revenues from the Workforce Solutions segment are likely to improve driven by strength in verification services that is benefiting from strong growth across governments, mortgage, talent solutions, and debt management. The Zacks Consensus Estimate for verification services revenues stands at $144 million, mirroring 10.8% year-over-year improvement.

The USIS segment revenues are expected to reflect the negative impact of the cybersecurity incident. The Zacks Consensus Estimate for this segment’s revenues is pegged at $327 million, reflecting year-over-year decline of 1.5%. In the first quarter, segment revenues decreased 1% year over year to $306.9 million.

Revenues from the Global Consumer Solutions segment are likely to decline due to decrease in U.S. consumer direct revenues. As the company is not advertising in the U.S. consumer direct business at least through second-quarter 2018, the business is on the wane due to customer churn. In the last reported quarter, segment revenues were down 3% year over year.

Strength across the International and Workforce Solutions segments will contribute toward year-over-year growth of Equifax’s total revenues. The Zacks Consensus Estimate for the same is pegged at $886 million, reflecting 3.4% year-over-year growth.

Equifax, Inc. Revenue (TTM)

Cybersecurity Incident to Remain a Drag on Bottom Line

The Zacks Consensus Estimate for earnings per share in the to-be-reported quarter is pegged at $1.54, indicating year-over-year decline of 3.8%. This downturn can be attributed to incremental cost for investments in IT and data security projects, and legal and professional fees incurred to address litigation claims in governmental as well as regulatory investigations associated with the cybersecurity incident.

Our Model Suggests a Beat

Please note that according to the Zacks model, a company with a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) has a good chance of beating estimates if it also has a positive Earnings ESP. Zacks Rank #4 (Sell) or 5 (Strong Sell) stocks are best avoided, especially if they have a negative Earnings ESP. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Equifax has an Earnings ESP of +1.08% and a Zacks Rank #3, a combination that increases the odds of an earnings beat.

Stocks to Consider

Here are a few stocks from the broader Business Services sector that investors may consider as our model shows that these have the right combination of elements to beat on earnings in second-quarter 2018.

Avis Budget Group (CAR - Free Report) has an Earnings ESP of +5.17% and a Zacks Rank #1. The company is scheduled to report quarterly numbers on Aug 7. You can see the complete list of today’s Zacks #1 Rank stocks here.

TransUnion (TRU - Free Report) has an Earnings ESP of +1.47% and a Zacks Rank of 3. The company is slated to report quarterly results on Jul 24.

Aptiv (APTV - Free Report) has an Earnings ESP of +0.08% and a Zacks Rank #3. The company is slated to report quarterly numbers on Jul 31.

Will You Make a Fortune on the Shift to Electric Cars?

Here's another stock idea to consider. Much like petroleum 150 years ago, lithium power may soon shake the world, creating millionaires and reshaping geo-politics. Soon electric vehicles (EVs) may be cheaper than gas guzzlers. Some are already reaching 265 miles on a single charge.

With battery prices plummeting and charging stations set to multiply, one company stands out as the #1 stock to buy according to Zacks research.

It's not the one you think.

See This Ticker Free >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Avis Budget Group, Inc. (CAR) - free report >>

Equifax, Inc. (EFX) - free report >>

TransUnion (TRU) - free report >>

Aptiv PLC (APTV) - free report >>