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Equifax Stock Apparently Is a Completely Scandal-Proof Investment

Dana Blankenhorn

Nine months after its huge loss of consumer data, Equifax (NYSE:EFX) stock has recovered most of its loss and people have moved on. Equifax stock wasn’t toxic for long.

The Atlanta-based credit reporting agency opened for trade June 26 at about $124.50 per share. It traded at about $142.70 just before announcing last September it lost records on 145.5 million people. 

Since then, Equifax has given compensation to some of the most persistent victims while fighting others in court. It said at the end of 2017 the breach had cost $439 million, but $150 million was covered by insurance.

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No Significant Financial Impact on Equifax Stock

A close look at the company’s financials indicates that income for the March quarter was unaffected by the breach, although higher costs cut net income by about one-third from where it had been a year ago.

The company earned $91 million, 75 cents per share fully diluted, on revenue of $865.7 million for the quarter.

Its balance sheet shows it has managed to cut long term debt over the last year, to $1.74 billion from $2.04 billion, and doubled the amount of cash on the books from the previous March, to $249 million from $123 million.

Equifax is next due to report earnings July 25, with analysts expecting $1.54 per share of earnings, about $180 million, on revenue of $882 million. The average analyst rating on the stock is now overweight.

While reporters said that 145.5 million “Equifax customers” were impacted, that’s not strictly true. Consumers aren’t customers. They’re subjects. Equifax is paid by merchants and credit card companies who use its data in deciding whether to grant credit.

Security Concerns and Equifax Stock

In May, Fortune reported that corporate America seems to have learned nothing from the breach, either, with thousands of organizations still downloading vulnerable versions of Apache Struts, the open source software that hackers compromised.

With open source software like Struts, the responsibility to download and load patches rests with the user. With proprietary software, like Microsoft (NYSE:MSFT) Windows, consumer patches are usually pushed automatically. But even here, many people use old versions of software that remains vulnerable.

The biggest impact of the breach on Equifax seems to be the game of musical chairs in its C-suite. CEO Richard Smith resigned with $90 million in severance, and was recently replaced with Mark Begor, a private equity executive who once ran the General Electric (NYSE:GE) credit card unit.

Former executive Jun Ying was accused of insider trading  for selling stock after he learned of the breach and before the public was notified.

In February, Equifax recruited Jamil Farshchi as its chief information security officer from Home Depot (NYSE:HD). Farshchi had been brought in by the Atlanta-based retailer after its 2014 breach, and the fact you may have trouble remembering that event speaks volumes about how the market reacts to such news.

Most recently Equifax named Bryson Koehler, formerly with IBM (NYSE:IBM), as its chief technology officer. Koehler had been CTO for IBM’s Watson project.

The Bottom Line on Equifax Stock

The scandal has not played out as I expected last September when I reported on it.

At the time I suggested that private equity might take out the company, rename it, and then return it to the market later. Equifax has been around since 1899, having been founded as a way for stores to pool resources on fraud. While a private equity executive is taking over, the actual impact on the stock has been minimal.

If you wanted to buy Equifax a year ago, you still do.

Dana Blankenhorn is a financial and technology journalist. He is the author of the historical mystery romance The Reluctant Detective Travels in Time, available now at the Amazon Kindle store. Write him at danablankenhorn@gmail.com or follow him on Twitter at @danablankenhorn. As of this writing he owned shares in MSFT.

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