It has been about a month since the last earnings report for Equifax (EFX). Shares have added about 4.6% 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 its most recent earnings report in order to get a better handle on the important drivers.
Equifax Beats Q2 Earnings and Revenue Estimates
Equifax 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.
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.
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.
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.
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%. Adjusted EPS is anticipated to be between $1.41 and $1.46 (including a negative foreign exchange impact of 2 cents).
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, reflecting year-over-year local currency growth of 2-5%.Adjusted EPS is now anticipated to be between $5.57 per share and $5.77 per share 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates.
Currently, Equifax has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% 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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