Equifax Inc. EFX reported better-than-expected third-quarter 2015 results that improved year over year as well. The company’s adjusted earnings per share from continuing operations of $1.14 surpassed the Zacks Consensus Estimate of $1.10 and increased 12.9% from the year-ago quarter.
Quarter Details
Equifax’s revenues of $678.1 million went up 8.8% year over year and beat the Zacks Consensus Estimate of $666 million. The year-over-year upside was supported by revenue growth across all the business segments.
Segment-wise, total U.S. Information Solutions (USIS) revenues were up 12% year over year to $312.3 million. Among sub-segments, revenue growth was recorded in the Online Information Solutions (up 13%), Mortgage Solutions Services (up 12%) and Financial Marketing Services (up 6%).
International revenues (including Europe, Canada and Latin America) were flat year over year at $148.8 million. However, on a constant currency basis, segment revenues climbed 14%. The company registered an increase of 5% each from Latin America and Europe regions. Though revenues from Canada were down 13% year over year, it improved 5% on a constant currency basis.
Revenues from the Workforce Solutions segment improved 13% year over year to $139 million, primarily on the back of 22% increase in revenues from Verification Services, partially offset by a 1% decline at Employer Services.
Personal Solutions contributed $67.3 million to revenues, reflecting a 5% year-over-year improvement.
Equifax’s adjusted operating income increased 13% year over year to $181.8 million. Therefore, adjusted operating margin improved 80 basis points (bps) to 27.2%. Adjusted net income came in at $137.6 million or $1.14 per share as against $124.9 million or $1.01 a year ago.
Equifax exited the quarter with $108.5 million in cash and cash equivalents, compared with $84.2 million at the end of second-quarter 2015. Total long-term debt (including current portion) was $1.15 billion. During the first three quarters of 2015, Equifax generated a cash flow of $536.8 million from operational activities.
During the first nine months, the company paid $103.4 million as dividends and repurchased stocks worth $196.3 million.
Guidance
Buoyed by the solid third-quarter performance, Equifax raised the earnings outlook for 2015, but narrowed the revenues guidance range. Adjusted earnings per share are now forecasted between $4.46 and $4.48 (mid-point $4.47), up from $4.38–$4.42 (mid-point $4.40). The Zacks Consensus Estimate is pegged at $4.43.
Further, the company narrowed the revenue guidance to a range of $2.652 billion to $2.662 billion (mid-point $2.657 billion) from the $2.645–$2.670 billion range. The Zacks Consensus Estimate is pegged at $2.667 billion.
Coming to the fourth-quarter outlook, Equifax projects revenues in the range of $655 million to $665 million (mid-point $660 million), while the Zacks Consensus Estimate is $670 million. Adjusted earnings per share are forecasted between $1.10 and $1.12 (mid-point $1.11). The Zacks Consensus Estimate stands at $1.11.
Our Take
Equifax reported better-than-expected third-quarter 2015 results which also improved year over year. Backed by the strong results, Equifax raised the full-year earnings outlook and provided encouraging 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 raise optimism.
Also, the company’s strong correlation with the consumer and financial markets as well as its 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 concern.
Currently, Equifax has a Zacks Rank #3 (Hold).
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