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Equifax (EFX) Up 0.2% Since Last Earnings Report: Can It Continue?

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A month has gone by since the last earnings report for Equifax (EFX - Free Report) . Shares have added about 0.2% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Equifax 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.

Equifax Q3 Earnings & Revenues Top Estimates

Equifax reported solid third-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of $1.48 per share beat the consensus mark by 4 cents and improved 4.9% on a year-over-year basis. The reported figure exceeded the guided range of $1.41-$1.46.

Revenues of $875.7 million outpaced the consensus estimate by $2.5 million and improved 5% year over year on a reported basis and 7% on a local currency basis. The reported figure came within the guided range of $865-$880 million.

During the reported quarter, Equifax entered into a partnership with Urjanet while continuing to progress well in its multi-year $1.25 billion EFX 2020 cloud technology and security transformation program.

Segmental Revenues

Revenues in the USIS division came in at $315.5 million, up 2% from the year-ago quarter’s number. Within the division, Online Information Solutions revenues of $233 million were up 5% year over year. Mortgage Solutions revenues of $36.7 million declined 6% year over year. Financial Marketing Services revenues came in at $45.8 million, down 2% year over year. The segment contributed 36% to total revenues.

Revenues in the International division totaled $230.5 million, down 2% year over year on a reported but up 5% on a local currency basis. Asia Pacific revenues of $77.4 million declined 4% year over year on a reported basis but grew 2% on a local currency basis. Revenues from Europe came in at $64.8 million, which fell 5% year over year on a reported basis and slightlyon a local currency basis. Latin America revenues of $49.2 million improved 1% year over year on a reported basis and 15% on a local currency basis. Canada revenues of $39.1 million rose 5% year over year on a reported basis and 6% on a local currency basis. The International segment contributed 26% to total revenues.

Revenues in the Workforce Solutions segment totaled $240.6 million, up 19% from the year-ago quarter figure. Within the segment, Verification Services revenues of $185.3 million were up 19% year over year. Employer Services revenues of $55.3 million were down 5% year over year. Workforce Solutions contributed 28% to total revenues.

Revenues in the Global Consumer Solutions segment amounted to $89.1 million, up 1% year over year on a reported basis and local currency basis. The segment contributed 10% to total revenues.

Operating Results

Adjusted EBITDA in third-quarter 2019 improved 10% year over year to $304.1 million. Adjusted EBITDA margin rose to 33.9% from 33% in the year-ago quarter.

Adjusted EBITDA margin for USIS was 44.4% compared with 46.2% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 30.9% compared with 29.4% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 48.8% compared with 47.5% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 24.9% compared with 28.3% in the year-ago quarter.

Balance Sheet and Cash Flow

Equifax exited third-quarter 2019 with cash and cash equivalents of $167.5 million compared with $135.8 million at the end of the prior quarter. Long-term debt of $2.83 billion was flat with the prior quarter.

The company used $164.9 million of cash in operating activities and capex was $97.2 million. Also, Equifax paid out dividend of $47.2 million to shareholders in the reported quarter.

Q4 Guidance

For the fourth quarter of 2019, Equifax expects revenues in the range of $885-$900 million, indicating year-over-year local currency growth of 7.5-9.5%. Adjusted EPS is anticipated between $1.47 and $1.52 (including a negative foreign exchange impact of 2 cents).

2019 Guidance

Equifax updated its full-year 2019 guidance for revenues while lowering the same for earnings.

For 2019, revenues are now expected between $3.507 and $3.522 billion compared with the previously guided range of $3.425-$3.525 billion. The current guidance indicates year-over-year local currency growth of 5% and 2% negative impact from foreign exchange movement. Adjusted EPS is now anticipated between $5.55 per share and $5.60 per share compared with the previously guided range of $5.57-$5.77. The current guidance includes 15 cents of negative impact of foreign exchange movement.

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month.

VGM Scores

At this time, Equifax has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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