A month has gone by since the last earnings report for TransUnion (TRU - Free Report) . Shares have added about 2.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is TransUnion due for a pullback? 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.
TransUnion Beats Q4 Earnings Estimates, Revenues Miss
TransUnion delivered mixed fourth-quarter 2018 results, with earnings surpassing the Zacks Consensus Estimate and revenues missing the same.
Adjusted earnings per share (EPS) of 66 cents outpaced the consensus mark by 3 cents and improved 32% year over year. Lower tax rate, resulting from Tax Cuts and Jobs Act, significantly contributed to the company’s earnings in the reported quarter.
Total revenues came in at $613 million, which missed the consensus mark by $11 million. The figure rallied 21% on a reported basis, 22% in terms of constant currency (cc) and 11% at organic cc. This uptick was driven by strong performance across all of the company’s operating segments — U.S. Information Services (USIS), International and Consumer Interactive — along with contributions from incremental credit monitoring revenues due to a breach at a competitor.
Adjusted revenues (excluding the impact of deferred revenue purchase, accounting reductions and other adjustments to revenues for the company’s recently acquired entities) came in at $624 million, up 23% year over year on a reported basis, 26% at cc and 11% at organic cc. Acquisitions of FactorTrust, iovation, HPS, Rubixis and Callcredit drove adjusted revenues.
Operating Segments’ Revenues
The U.S. Information Services (USIS) revenues of $369 million increased 18% year over year on a reported basis and 12% on an organic basis. USIS adjusted revenues amounted to $370 million.
Within the segment, Financial Services revenues of $190 million increased 19% and 15%, respectively, on a reported and organic basis. Emerging Verticals including Healthcare, Insurance and all other verticals, revenues were $179 million, up 18% year over year on a reported basis and 9% on an organic basis. Adjusted revenue was $180 million.
International revenues surged 47% year over year on a reported and 57% on a constant-currency basis to $141 million. Canada, Latin America, Africa and India revenue increased while Asia Pacific revenues decreased year over year.
Revenues at the Consumer Interactive segment improved 6% from the prior-year quarter number to $121 million. This included roughly $5 million of incremental credit monitoring revenues due to a breach at a competitor.
Adjusted EBITDA was $249 million, up 27% year over year on a reported and 29% at cc. Adjusted EBITDA margin of 39.9% expanded 110 basis points (bps) year over year.
Balance Sheet and Cash Flow
TransUnion had $187.4 million in cash and cash equivalents at the end of the fourth quarter compared with $226.6 million at the end of the prior quarter. Long-term debt was $4 billion compared with 4.1 billion in the prior quarter. The company generated $146.3 million in cash from operating activities and spent $61.8 million on capex.
For the first quarter of 2019, TransUnion expects adjusted revenues between $614 million and $619 million, reflecting an improvement of 14-15% year over year.
Adjusted EBITDA is envisioned in the range of $233-$236 million, mirroring an increase of 15-17%. Adjusted EPS is expected between 58 cents and 59 cents, indicating a rise of 2-4% year over year.
TransUnion expects adjusted revenues between $2.59 billion and $2.61 billion, reflecting year-over-year increase of 10.5-11.5%. Adjusted EBITDA is anticipated in the range of $1.017-$1.032 million, mirroring year-over-year increase of 11-13%. Adjusted EPS is anticipated in the band of $2.57-$2.63, indicating improvement of 3-5%.
How Have Estimates Been Moving Since Then?
Fresh estimates followed a downward path over the past two months. The consensus estimate has shifted -13.58% due to these changes.
Currently, TransUnion has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of F on the value side, putting it in the lowest 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.
TransUnion has a Zacks Rank #4 (Sell). We expect a below average return from the stock in the next few months.