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Equifax (EFX) Up 9.7% Since Last Earnings Report: Can It Continue?
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It has been about a month since the last earnings report for Equifax (EFX - Free Report) . Shares have added about 9.7% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Equifax Q2 Earnings Surpass Estimates, Revenues Lag
Equifax reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of $1.56 per share outpaced the consensus mark by 2 cents but declined 2.5% year over year. The bottom-line figure came in at the higher end of the guided range of $1.51-$1.56 per share. Costs associated with the cybersecurity incident and buyout-related amortization expenses resulted in the earnings decline, offset by the new tax (Tax Cuts and Jobs Act) law benefits. The company enjoyed a tax benefit of $1.9 million in the quarter.
Revenues came in at $876.9 million, which missed the consensus estimate by $9 million but increased 2.4% year over year. The reported figure was below the guided range of $880-$890 million. Strength across the International and Workforce Solutions segments contributed toward year-over-year revenue growth. These were, however, partially offset by Equifax’s soft business at the U.S. Information Solutions (USIS) and Global Consumer Solutions segments.
Revenues by Segment
Revenues from the USIS division amounted to $324.6 million, down 2% from the year-ago quarter. The division suffered revenues decline of 4% at Online Information Solutions ($219.7 million) and 9% at Financial Marketing Services ($45.5 million) sub-segments, while sales at Mortgage Solutions grew 18% to $41.7 million. USIS accounted for 37% of total revenues.
Revenues from the International division totaled $250.3 million, up 8% year over year on a reported as well as constant-currency basis. On the international front, Equifax registered revenue growth of 12%, 6%, 2% and 13% in Asia-Pacific, Europe, Latin America and Canada, respectively. On a local-currency basis, revenues from Asia-Pacific, Europe, Latin America and Canada grew 12%, 1%, 15% and 8%, respectively. International accounted for 28% of total revenues.
Revenues from the Workforce Solutions segment summed $207.6 million, up 7% from the year-ago quarter. This improvement includes Verification Services revenues of $149.3 million (up 15% year over year) and Employer Services revenues of $58.3 million (down 9% year over year). Workforce Solutions contributed to 24% of total revenues.
Revenues from Global Consumer Solutions segment came in at $94.4 million, down 5% year over year on a reported as well as local-currency basis. It contributed to 11% of total revenues.
Operating Results
Adjusted EBITDA in second-quarter 2018 decreased 8% year over year to $306.9 million. Adjusted EBITDA margin was 35% compared with 39.1% in the year-ago quarter.
Adjusted EBITDA margin for USIS was 47.7% compared with 51.5% in the year-ago quarter. Adjusted EBITDA margin for International was 30.5% in second quarter compared with 30.9% in the year-ago quarter. Workforce Solutions’ adjusted EBITDA margin was 47.6% compared with 51.2% in the prior-year quarter. Adjusted EBITDA margin for Global Consumer Solutions was 31% flat with the year-ago tally.
Balance Sheet and Cash Flow
Equifax exited second-quarter with cash and cash equivalents of $327.4 million, higher than $249.3 million in the prior quarter. Long-term debt at the end of the quarter was $2.6 billion compared with $1.7 billion in the prior quarter. The company generated $235.2 million of cash from operating activities and spent $62.5 million in capital expenditures. Also, Equifaxpaid dividend of $47 million to its shareholders in the quarter.
Guidance
For the third quarter of 2018, Equifax expect revenues to be in the range of $853-$863 million, reflecting year-over-year constant-currency growth of 4-5%. The guided range is much below the Zacks Consensus Estimate of $870.9 million. Adjusted EPS is anticipated to be between $1.39 and $1.44. This projected range is also far below the Zacks Consensus Estimate of $1.54.
For 2018, revenues are expected to be between $3.425 billion and $3.525 billion, the mid-point of which is slightly below the Zacks Consensus Estimate of $3.50 billion. Adjusted EPS is anticipated to be between $5.80 and $6.00. Mid-point of this guided range is also slightly below the Zacks Consensus Estimate of $5.94.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.93% due to these changes.
VGM Scores
At this time, Equifax has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, 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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Equifax (EFX) Up 9.7% Since Last Earnings Report: Can It Continue?
It has been about a month since the last earnings report for Equifax (EFX - Free Report) . Shares have added about 9.7% in that time frame, outperforming 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 the most recent earnings report in order to get a better handle on the important catalysts.
Equifax Q2 Earnings Surpass Estimates, Revenues Lag
Equifax reported mixed second-quarter 2018 results, wherein earnings surpassed the Zacks Consensus Estimate but revenues missed the same.
Adjusted earnings of $1.56 per share outpaced the consensus mark by 2 cents but declined 2.5% year over year. The bottom-line figure came in at the higher end of the guided range of $1.51-$1.56 per share. Costs associated with the cybersecurity incident and buyout-related amortization expenses resulted in the earnings decline, offset by the new tax (Tax Cuts and Jobs Act) law benefits. The company enjoyed a tax benefit of $1.9 million in the quarter.
Revenues came in at $876.9 million, which missed the consensus estimate by $9 million but increased 2.4% year over year. The reported figure was below the guided range of $880-$890 million. Strength across the International and Workforce Solutions segments contributed toward year-over-year revenue growth. These were, however, partially offset by Equifax’s soft business at the U.S. Information Solutions (USIS) and Global Consumer Solutions segments.
Revenues by Segment
Revenues from the USIS division amounted to $324.6 million, down 2% from the year-ago quarter. The division suffered revenues decline of 4% at Online Information Solutions ($219.7 million) and 9% at Financial Marketing Services ($45.5 million) sub-segments, while sales at Mortgage Solutions grew 18% to $41.7 million. USIS accounted for 37% of total revenues.
Revenues from the International division totaled $250.3 million, up 8% year over year on a reported as well as constant-currency basis. On the international front, Equifax registered revenue growth of 12%, 6%, 2% and 13% in Asia-Pacific, Europe, Latin America and Canada, respectively. On a local-currency basis, revenues from Asia-Pacific, Europe, Latin America and Canada grew 12%, 1%, 15% and 8%, respectively. International accounted for 28% of total revenues.
Revenues from the Workforce Solutions segment summed $207.6 million, up 7% from the year-ago quarter. This improvement includes Verification Services revenues of $149.3 million (up 15% year over year) and Employer Services revenues of $58.3 million (down 9% year over year). Workforce Solutions contributed to 24% of total revenues.
Revenues from Global Consumer Solutions segment came in at $94.4 million, down 5% year over year on a reported as well as local-currency basis. It contributed to 11% of total revenues.
Operating Results
Adjusted EBITDA in second-quarter 2018 decreased 8% year over year to $306.9 million. Adjusted EBITDA margin was 35% compared with 39.1% in the year-ago quarter.
Adjusted EBITDA margin for USIS was 47.7% compared with 51.5% in the year-ago quarter. Adjusted EBITDA margin for International was 30.5% in second quarter compared with 30.9% in the year-ago quarter. Workforce Solutions’ adjusted EBITDA margin was 47.6% compared with 51.2% in the prior-year quarter. Adjusted EBITDA margin for Global Consumer Solutions was 31% flat with the year-ago tally.
Balance Sheet and Cash Flow
Equifax exited second-quarter with cash and cash equivalents of $327.4 million, higher than $249.3 million in the prior quarter. Long-term debt at the end of the quarter was $2.6 billion compared with $1.7 billion in the prior quarter. The company generated $235.2 million of cash from operating activities and spent $62.5 million in capital expenditures. Also, Equifaxpaid dividend of $47 million to its shareholders in the quarter.
Guidance
For the third quarter of 2018, Equifax expect revenues to be in the range of $853-$863 million, reflecting year-over-year constant-currency growth of 4-5%. The guided range is much below the Zacks Consensus Estimate of $870.9 million. Adjusted EPS is anticipated to be between $1.39 and $1.44. This projected range is also far below the Zacks Consensus Estimate of $1.54.
For 2018, revenues are expected to be between $3.425 billion and $3.525 billion, the mid-point of which is slightly below the Zacks Consensus Estimate of $3.50 billion. Adjusted EPS is anticipated to be between $5.80 and $6.00. Mid-point of this guided range is also slightly below the Zacks Consensus Estimate of $5.94.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -5.93% due to these changes.
VGM Scores
At this time, Equifax has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. The stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Zacks style scores indicate that the company's stock is suitable for value and growth investors.
Outlook
Estimates have been broadly trending downward for the stock and the magnitude of these revisions indicates a downward shift. Interestingly, Equifax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.