A month has gone by since the last earnings report for Equifax (EFX). Shares have added about 4.1% 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 Beats Q4 Earnings Estimates, Revenues Lag
Equifax reported mixed fourth-quarter 2018 results, with earnings beating the Zacks Consensus Estimate and revenues missing the same.
Fourth-quarter adjusted earnings of $1.38 per share beat the Zacks Consensus Estimate by 6 cents and declined nearly 1% on a year-over-year basis. The figure exceeded guidance of $1.30-$1.35. Costs associated with the cybersecurity incident weighed on the bottom line.
Revenues totaled $835.3 million, which lagged the consensus mark by $5 million and fell slightly year over year. The top line was at the lower end of the guidance of $835-$850 million. Weakness in the USIS, International and Global Consumer Solutions segments resulted in year-over-year downside. This was partially offset by strength in the Workforce Solutions segment.
Let’s check out the numbers in detail.
Revenues in the USIS division grossed $307.4 million, down 2% from the year-ago quarter’s number. Within the division, Online Information Solutions revenues of $211.4 million increased slightly year over year. Mortgage Solutions revenues of $27.3 million declined 17% year over year. Financial Marketing Services revenues came in at $68.7 million, down 1% year over year. The segment contributed 37% to total revenues.
Revenues in the International division totaled $236.4 million, down 3% year over year on a reported basis but up 5% on a constant-currency (cc) basis. On the international front, Equifax reported year-over-year revenue decline of 3% and 14% in Asia-Pacific and Latin, respectively. Revenues in Europe increased 2% year over year. On a local-currency basis, revenues from Asia-Pacific, Europe and Latin America grew 3%, 5% and 8%, respectively. Canada revenues rose 1% year over year on a reported basis and 5% on a local-currency basis. The segment contributed 28% to total revenues.
Revenues in the Workforce Solutions segment totaled at $205.9 million, up 12% from the year-ago quarter’s figure. The improvement includes Verification Services revenues of $145.4 million (up 15% year over year) and Employer Services revenues of $60.5 million (up 6% year over year). Workforce Solutions contributed 25% to total revenues.
Revenues in the Global Consumer Solutions segment amounted to $85.6 million, down 12% year over year on a reported as well as local-currency basis. The segment contributed 10% to total revenues.
Adjusted EBITDA in the fourth quarter fell 5% year over year to $277.6 million. Adjusted EBITDA margin was 33.2% compared with 34.8% in the year-ago quarter.
Adjusted EBITDA margin for USIS was 47.5% compared with 48.5% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 32.4% compared with 28.3% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 48.7% compared with 45.5% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 21.1% compared with 32.4% in the year-ago quarter.
Balance Sheet and Cash Flow
Equifax exited fourth quarter with cash and cash equivalents of $223.6 million, lower than $253.4 million in the prior quarter. Long-term debt at the end of the quarter was $2.6 billion flat with the prior-quarter tally. The company generated $164.8 million of cash from operating activities and spent $113.8 million in capital expenditures. Also, Equifaxpaid dividend of $47.1 million to shareholders in the quarter.
Management expects first-quarter 2019 revenues in the range of $840-$855 million. Adjusted EPS are anticipated between $1.15 and $1.20.
For 2019, revenues are expected between $3.425 billion and $3.525 billion. Adjusted EPS is anticipated between $5.60 and $5.80.
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 -14.68% due to these changes.
At this time, Equifax has a subpar Growth Score of D, a grade with the same score on the momentum front. Charting a somewhat similar path, 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.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, 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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