Zacks
0
All posts from Zacks
Zacks in Our Research. Your Success.,

Equifax (EFX) Tops Q1 Earnings & Revenues, Lifts FY16 Outlook

Equifax Inc. EFX started 2016 on a strong note, starting with better-than-expected results for the first quarter. The company’s adjusted earnings per share from continuing operations of $1.23 surpassed the Zacks Consensus Estimate of $1.16 and jumped 15% year over year.

Details of the Quarter

Equifax’s revenues of $728.3 million came ahead of both the Zacks Consensus Estimate of $689 million and management’s guidance range of $685–$695 million. Additionally, the figure soared 11.7% year over year.

From the first quarter onward, the company has been making slight changes in its reportable segments. The U.S. Information Solutions (USIS) and Workforce Solutions remained unchanged, while the name of Personal Solutions has been changed 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 4% year over year to $294.9 million. Among its sub-segments, revenue growth was recorded in Online Information Solutions (5%), Mortgage Solutions Services (1%) and Financial Marketing Services (1%).

International revenues (including Europe, the Asia-Pacific, Canada and Latin America) surged 17% year over year to $158.1 million. Moreover, on a constant currency basis, revenues climbed 30%. The company registered an increase of 10% in Europe. However, revenues from Latin America and Canada tanked 11% and 10%, respectively.

Revenues from the Workforce Solutions segment surged 21% year over year to $180.1 million, primarily on the back of revenue growth of 16% in Verification Services and 29% in Employer Services.

Global Consumer Solutions contributed $95.2 million to the total revenue, reflecting a 14% year-over-year jump.

Equifax’s adjusted operating income increased 23.2% to $222.7 million. Consequently, adjusted operating margin expanded 290 basis points (bps) to 30.6%. Adjusted net income came in at $148.9 million or $1.23 per share, as against $129.7 million or $1.07 per share reported a year ago.

Equifax exited the quarter with $96.8 million in cash and cash equivalents, compared with $93.3 million at the end of fourth-quarter 2015. Total long-term debt (excluding current portion) was approximately $1.88 billion. During the quarter, Equifax generated cash flow of $90.3 million from operational activities. The company paid $39.7 million as dividends in the first quarter.

Guidance

Buoyed by strong first-quarter results, Equifax raised its guidance for the full year. The company now expects revenues between $3.05 billion and $3.15 billion (midpoint: $3.10 billion), up from the earlier projection of $3.0–$3.1 billion (midpoint: $3.05 billion). The revenue outlook at the midpoint is above the Zacks Consensus Estimate of $3.051 billion.

Adjusted earnings per share are now forecasted between $5.15 and $5.25 (midpoint: $5.20), up from previous projection of $4.95–$5.05 (midpoint: $5.00). The Zacks Consensus Estimate is pegged slightly higher at $5.04.

Coming to the second-quarter outlook, Equifax projects revenues in the range of $795 million to $805 million (midpoint: $800 million), while the Zacks Consensus Estimate is $791 million. Adjusted earnings per share are forecasted between $1.34 and $1.36 (midpoint: $1.35). The Zacks Consensus Estimate is pegged lower at $1.32.

Our Take

Equifax posted better-than-expected results for the first quarter, which also grew year over year. Moreover, the company issued an encouraging outlook for 2016, wherein both revenues and earnings guidance were above the respective Zacks Consensus Estimate at the midpoint.

Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America, should provide tailwinds. Also, the company’s strong correlation with the consumer and financial markets as well as exposure in the U.S. and Europe are likely to propel growth, going ahead.

However, competition from the likes of Automatic Data Processing Inc. ADP, Fiserv Inc. FISV Moody’s Corp. MCO and uncertainty in the mortgage sector raise concerns.

Currently, Equifax has a Zacks Rank #2 (Buy).

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
 
MOODYS CORP (MCO): Free Stock Analysis Report
 
EQUIFAX INC (EFX): Free Stock Analysis Report
 
AUTOMATIC DATA (ADP): Free Stock Analysis Report
 
FISERV INC (FISV): Free Stock Analysis Report
 
To read this article on Zacks.com click here.