Is This the Right Time to Invest in Equifax (EFX) Stock?
Shares of Equifax Inc. EFX hit a new 52-week high of $112.42 on Nov 27, eventually closing at $112.32. The closing share price represents a one-year return of 41.5% and a year-to-date return of 38.9%. The average trading volume for the last three months aggregated approximately 639K shares.
The company has been gaining significantly on the back of ongoing growth initiatives, product innovation, shareholder-friendly moves and impressive quarterly results.
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. The company expects to derive 1% to 2% revenue growth from these buyouts 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 down and need no integration time while diversifying the revenue source. To tap the immense growth opportunity in the Brazilian credit data market, Equifax merged 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 help it to register solid growth over the long term.
The regular dividends and share repurchases also keep investors interested in the stock. During the first nine months, the company paid $103.4 million as dividends and repurchased stocks worth $196.3 million.
Equifax reported better-than-expected third-quarter 2015 results which 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.
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 business segments.
Backed by the strong results, Equifax raised its full-year earnings outlook and provided an encouraging fourth-quarter guidance.
For 2015, adjusted earnings per share are now forecast between $4.46 and $4.48, up from $4.38–$4.42. The Zacks Consensus Estimate is pegged at $4.47.
Coming to the fourth-quarter outlook, Equifax projects revenues in the range of $655 million to $665 million, while the Zacks Consensus Estimate stands at $663 million. Adjusted earnings per share are forecast between $1.10 and $1.12. The Zacks Consensus Estimate stands at $1.11.
However, competition from the likes of Automatic Data Processing Inc. ADP, Fiserv Inc. FISV and TransUnion TRU and a highly leveraged balance sheet are concerns.
Equifax currently carries a Zacks Rank #3 (Hold).
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