Equifax Inc. (EFX) reported third-quarter 2014 adjusted earnings per share from continuing operations of $1.01, beating the Zacks Consensus Estimate by a couple of cents. Earnings were up 12.2% from the year-ago quarter.
Quarter Details
Equifax’s revenues of $613.4 million were up 7.2% year over year but missed the Zacks Consensus Estimate of $632 million. The year-over-year increase resulted from revenue growth in all its business segments.
Segment-wise, total U.S. Consumer Information Solutions revenues were up 3% from the year-ago quarter to $278.6 million. Among sub-segments, growth was recorded in the Financial Marketing Services segment (up 2%) and Online Information Solutions (up 4%), while Mortgage Solutions Services remained flat year over year.
International revenues (including Europe, Canada and Latin America) were up 18% year over year to $158.4 million, primarily due to 51% growth in the Europe segment while revenues from Canada and Latin America remained flat on a year-over-year basis. Revenues from Europe included the contribution from the TDX Group acquisition.
Revenues from the Workforce Solutions segment increased 6% on a year-over-year basis to $122.5 million, primarily due to 10% and 1% increase in revenues from Verification Services and Employer Services, respectively.
North American Personal Solutions contributed $53.9 million to revenues, reflecting a 3% year-over-year improvement.
Equifax’s adjusted operating margins came in at 26.3% compared with 26.2% reported in the year-ago quarter, primarily due to the effect of the acquisitions. Adjusted net income came in at $124.9 million or $1.01 per share compared with $111.6 million or 90 cents reported in the year-ago quarter.
Equifax exited the quarter with $115 million in cash and cash equivalents, compared with $91.7 million in the previous quarter. Total long-term debt (including current portion) stood at $1.55 billion. During the quarter, the company paid dividends of 25 cents per share and repurchased stocks worth $113.1 million. The company has also initiated a new buyback plan worth $400 million in Sep 2014.
Guidance
Considering the recent domestic and international business activities, current foreign exchange rates and the expected slowdown in mortgage activities, management expects revenues in the fourth quarter to range between $615 million and $620 million (mid-point $617.5 million), while the Zacks Consensus Estimate is pegged at $633 million. Earnings are forecasted between 99 cents and $1.03 (mid-point $1.01). The Zacks Consensus Estimate is pegged at $1.04 cents.
Our Take
Equifax reported mixed third-quarter results. While the bottom line beat the Zacks Consensus Estimate, the top line lagged the same. Nonetheless, the company’s revenues increased on a year-over-year basis aided by strong growth across its business segments. The company also provided tepid fourth-quarter guidance.
Management’s efforts such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America were encouraging.
Given the company’s strong correlation to consumer and financial markets as well as its U.S. and European exposure, we see a gradual improvement in results. Moreover, improving mortgage environment could be a positive for the stock. However, stiff competition from Automatic Data Processing Inc. (ADP), Fiserv Inc. (FISV), Moody’s Corp. (MCO) and uncertainty in the mortgage sector are the concerns.
Currently, Equifax has a Zacks Rank #2 (Buy).
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