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Equifax (EFX) Beats Q2 Earnings Estimates, Cuts '19 EPS View

Zacks Equity Research

Equifax Inc. EFX reported solid second-quarter 2019 results, wherein the company’s earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of $1.40 per share beat the consensus mark by 4 cents but declined 10.3% on a year-over-year basis. The reported figure exceeded the guided range of $1.32-$1.37.

Revenues of $880 million outpaced the consensus estimate by $8.2 million and improved 0.4% year over year on a reported basis and 3% on a local currency basis. The reported figure came in at the higher end of the guided range of $865 million-$880 million.

During the reported quarter, Equifax completed the acquisition of PayNet, a provider of commercial credit risk underwriting and management solutions to online and alternative finance lenders. The acquisition should help Equifax expand its differentiated data assets. The company continues to invest heavily in its multi-year $1.25 billion EFX 2020 cloud technology and security transformation program.The company also announced a comprehensive resolution of significant U.S. consumer-related litigation and regulatory matters related to the 2017 cybersecurity incident. 

So far this year, shares of Equifax have gained 52.8% compared with 42.8% rise of the industry it belongs to and 18.2% increase of the Zacks S&P 500 composite.

 

Let’s check out the numbers in detail.

Segmental Revenues

Revenues in the USIS division came in at $332.7 million, up 2% from the year-ago quarter’s number. Within the division, Online Information Solutions revenues of $246.1 million were up 10% year over year. Mortgage Solutions revenues of $35.6 million declined 22% year over year. Financial Marketing Services revenues came in at $51 million, down 7% year over year. The segment contributed 38% to total revenues.

Revenues in the International division totaled $229 million, down 9% year over year. Asia Pacific revenues of $75.9 million decreased 12% year over year on a reported basis and 5% on a local currency basis. Revenues from Europe came in at $66 million, which fell 9% year over year on a reported basis and 3% on a local currency basis. Latin America revenues of $47.6 milliondeclined 12% year over year on a reported basis but improved 8% on a local currency basis. Canada revenues of $39.5 million rose 5% year over year on a reported basis and 9% on a local currency basis. The International segment contributed 26% to total revenues.

Revenues in the Workforce Solutions segment totaled $230.1 million, up 11% from the year-ago quarter figure. Within the segment, Verification Services revenues of $172.3 million were up 15% year over year. Employer Services revenues of $57.8 million were down 1% year over year. Workforce Solutions contributed 26% to total revenues.

Revenues in the Global Consumer Solutions segment amounted to $88.2 million, down 7% year over year on a reported basis and 6% on a local currency basis. The segment contributed 10% to total revenues.

Operating Results

Adjusted EBITDA in second-quarter 2019 fell 3.5% year over year to $296.2 million. Adjusted EBITDA margin was 33.7% compared with 35% in the year-ago quarter.

Adjusted EBITDA margin for USIS was 45.6% compared with 47.7% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 28.6% compared with 30.5% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 49.3% compared with 47.6% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 22.9% compared with 31% in the year-ago quarter.

Equifax, Inc. Price, Consensus and EPS Surprise

 

Equifax, Inc. Price, Consensus and EPS Surprise

Equifax, Inc. price-consensus-eps-surprise-chart | Equifax, Inc. Quote

Balance Sheet and Cash Flow

Equifax exited second-quarter 2019 with cash and cash equivalents of $135.8 million compared with $133.2 million at the end of the prior quarter. Long-term debt at the end of the quarter was $2.83 billion compared with $2.66 billion at the end of the first-quarter 2019.

The company generated $217 million of cash from operating activities and capex was $93.7 million. Also, Equifax paid dividend of $47.1 million to shareholders in the reported quarter.

Q3 Guidance

For the third quarter of 2019, Equifax expects revenues in the range of $865-$880 million, reflecting year-over-year local currency growth of 4.5-6%. The current Zacks Consensus Estimate of $867.05 million lies below the midpoint of the guided range.

Adjusted EPS is anticipated to be between $1.41 and $1.46 (including a negative foreign exchange impact of 2 cents).The current Zacks Consensus Estimate of $1.50 is above the guided range.

2019 Guidance

Equifax reaffirmed its full-year 2019 guidance for revenues while lowering the same for earnings.

For 2019, revenues are expected between $3.425 billion and $3.525 billion, indicating year-over-year local currency growth of 2-5%. The current Zacks Consensus Estimate of $3.46 billion lies below the midpoint of the guided range.

Adjusted EPS is now anticipated to be between $5.57 and $5.77 compared with the previously guided range of $5.60-$5.80. The current guidance includes 3 cents adjustment for interest expense related to legal and regulatory settlements and 12 cents of negative impact of foreign exchange movement. The current Zacks Consensus Estimate of $5.63 lies within the guided range.

Zacks Rank & Upcoming Releases

Currently, Equifax carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Investors interested in the broader Zacks Business Services sector are awaiting second-quarter 2019 earnings of key players like Insperity NSP, Waste Connections WCN and Verisk Analytics VRSK. While Insperity and Waste Connections are slated to report on Jul 29, Verisk Analytics is scheduled to release results on Jul 30.

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