A month has gone by since the last earnings report for Equifax (EFX). Shares have added about 4% 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 Tops Q1 Earnings
Equifax reported better-than-expected first-quarter 2023 results.
Adjusted earnings (excluding 52 cents from non-recurring items) came in at $1.43, beating the consensus mark by 4.4% but declining 35.6% from the year-ago figure. Total revenues of $1.3 billion surpassed the consensus estimate by 1.5% but decreased 4.5% on a reported basis from the year-ago figure. The top line was down 3% on a local currency basis.
Revenues in the Workforce Solutions segment totaled $596.3 million, down 8% from the year-ago quarter’s figure. Within the segment, Verification Services’ revenues of $455.8 million were down 11% year over year. Employer Services’ revenues of $140.5 million were up 4% year over year.
Revenues in the USIS segment were $421.7 million, down 3% from the year-ago quarter’s level. Within the segment, Online Information Solutions’ revenues of $341 million were down 1% from the year-ago quarter’s figure. Mortgage Solutions’ revenues of $33.3 million declined 23% year over year. Financial Marketing Services’ revenues were $47.4 million, increasing 4% year over year.
Revenues in the International division totaled $284 million, gaining 1% and 9% year over year on a reported basis and a local-currency basis, respectively. Asia Pacific revenues of $84.6 million increased 4% from the year-ago reported figure on a reported basis and 11% on a local-currency basis.
Revenues from Europe amounted to $75.7 million, down 12% year over year on a reported basis and 4% on a local-currency basis. Latin America revenues of $55.3 million grew 17% year over year on a reported basis and 32% on a local-currency basis. Canada revenues of $63.1 million were up 2% year over year on a reported basis and 8% on a local-currency basis.
Adjusted EBITDA in the first quarter of 2023 totaled $379.6 million, down 22% from the year-ago quarter’s level. Adjusted EBITDA margin fell 630 basis points from the year-ago reported figure to 29.2%.
Workforce Solutions’ adjusted EBITDA margin was 50.4% compared with 54.6% a year ago. Adjusted EBITDA margin for the USIS division was 32.6% compared with 39.3% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 25.8% compared with 29.9% in the prior-year quarter.
Balance Sheet & Cash Flow
EFX exited the first quarter with cash and cash equivalents of $232.5 million. Equifax generated $150.9 million in cash from operating activities in the quarter. The company has a long-term debt of $4.99 billion compared with $4.82 billion in the year-ago reported figure. Capital expenditures were $158.3 million. During the reported quarter, the company paid $47.9 million through dividends.
Q2 and 2023 outlook
For the second quarter of 2023, revenues are expected to be in the $1.31-1.33 billion band. Adjusted EPS is expected to be in the range of $1.6-$1.7. For 2023, revenues are expected in the range of $5.27-$5.37 billion. Adjusted EPS is expected to be in the range of $7.05-$7.35.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in estimates revision.
The consensus estimate has shifted -11.31% due to these changes.
At this time, Equifax has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 F. 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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