Equifax Inc. EFX is moving steadily ahead on the growth trajectory, gathering momentum from positive earnings surprise history and solid fundamentals. Also, shares of Equifax have been trending upward with a positive year-to-date return of over 39%.
An impressive track record of surpassing quarterly earnings expectations, an upbeat full-year 2015 earnings outlook, solid cash flow and Equifax’s continuous share buybacks and dividend payments remain the growth drivers.
Notably, Equifax beat the Zacks Consensus Estimate thrice in the last four quarters with an average positive earnings surprise of 3.27%. The company’s third-quarter 2015 results fared better than the Zacks Consensus Estimate as well as the year-ago level.
Equifax’s revenues of $678.1 million went up 8.8% year over year and exceeded the Zacks Consensus Estimate of $666 million. Similarly, 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. Supported by the strong results, the company raised the full-year earnings outlook and issued encouraging fourth-quarter guidance.
The regular dividends and share repurchases also keep investors interested in the stock. During the first nine months of 2015, the company paid $103.4 million as dividends and repurchased stocks worth $196.3 million.
Apart from this, some of the optimism surrounding the stock may be attributed to Equifax’s recent agreement to take over Veda Group Limited, the leading Australian credit information provider. Per the deal, Equifax will buy all the outstanding common stocks of Veda for AUD$2.825 each, higher than its earlier offer of AUD$2.70. If all goes well, this would be Equifax’s biggest acquisition, surpassing the $1 billion CSC Credit Services buyout in 2012.
Equifax has made strategic acquisitions to supplement its core business. In 2014, the company took over TDX Group and Forseva from which it expects to derive 1% to 2% revenue growth over the long term.
Apart from acquisitions, Equifax has remained enthusiastic about forming joint ventures that could expand its business internationally. Joint ventures keep operating costs in check and need no integration time while diversifying the revenue source.
To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged the credit reporting operations of its Brazilian subsidiary with Boa Vista Servicos S.A., the second-largest consumer credit bureau in Brazil. The company expects its investments in the joint ventures to yield desired results and record solid long-term growth.
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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