Equifax (EFX) Down 16.5% Since Last Earnings Report: Can It Rebound?

It has been about a month since the last earnings report for Equifax (NYSE:EFX). Shares have lost about 16.5% in that time frame, outperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Equifax due for a breakout? 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 Q4 Earnings & Revenues Top Estimates

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

Adjusted earnings of $1.53 per share beat the consensus mark by 2.7% and improved 11% on a year-over-year basis. The reported figure exceeded the guided range of $1.47-$1.52.

Revenues of $905.8 million outpaced the consensus estimate by 0.9% and improved 8% year over year on a reported basis and 10% on a local currency basis. The reported figure exceeded the guided range of $885-$900 million.

In 2019, Equifax made significant progress in its multi-year $1.25 billion EFX 2020 cloud technology transformation, along with the ongoing migration of its data, analytics, and application infrastructure to cloud native technology.

Let’s check out the numbers in detail.

Segmental Revenues

Revenues in the USIS division came in at $330.9 million, up 8% from the year-ago quarter’s number. Within the division, Online Information Solutions revenues of $227.3 million were up 8% year over year. Mortgage Solutions revenues of $32.5 million improved 19% year over year. Financial Marketing Services revenues came in at $71.1 million, up 3% year over year. The segment contributed 37% to total revenues.

Revenues in the International division totaled $235.9 million, down slightly year over year on a reported basis but up 4% on a local currency basis. Asia Pacific revenues of $73.7 million declined 4% year over year on a reported basis but grew 1% on a local currency basis. Revenues from Europe came in at $76.3 million, which grew slightly year over year on a reported basis and 1% on a local currency basis. Latin America revenues of $46.4 million declined 3% year over year on a reported basis but grew 11% on a local currency basis. Canada revenues of $39.5 million rose 9% year over year on a reported basis and on a local currency basis. The International segment contributed 26% to total revenues.

Revenues in the Workforce Solutions segment totaled $250.5 million, up 22% from the year-ago quarter’s figure. Within the segment, Verification Services revenues of $193.6 million were up 33% year over year. Employer Services revenues of $56.9 million were down 6% year over year. Workforce Solutions contributed 28% to total revenues.

Revenues in the Global Consumer Solutions segment amounted to $88.5 million, up 3% year over year on a reported basis and local currency basis. The segment contributed 10% to total revenues.

Operating Results

Adjusted EBITDA margin rose to 35.2% from 33.2% in the year-ago quarter.

Adjusted EBITDA margin for USIS was 45.1% compared with 47.5% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 36.4% compared with 32.4% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 47% compared with 48.7% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 26.9% compared with 21.1% in the year-ago quarter.

Balance Sheet and Cash Flow

Equifax exited fourth-quarter 2019 with cash and cash equivalents of $401.3 million compared with $167.5 million at the end of the prior quarter. Long-term debt was $3.38 billion compared with $2.83 billion at the end of the prior quarter.

The company used $230.7 million of cash in operating activities and capex was $93.9 million. Also, Equifax paid out dividend of $47.3 million to shareholders in the reported quarter.

Q1 Guidance

For the first quarter of 2020, Equifax expects revenues in the range of $915-$930 million, indicating year-over-year local currency growth of 9-11%. Adjusted EPS is anticipated between $1.29 and $1.34 (including a negative foreign exchange impact of less than a penny).

2020 Guidance

Equifax unveiled its full-year 2020 guidance for revenues and earnings. For 2020, revenues are expected between $3.65 billion and $3.75 billion. The current guidance indicates year-over-year local currency growth of 4-7% and 1% negative impact from foreign exchange movement. Adjusted EPS is now anticipated between $5.60 and $5.80 (including a negative foreign exchange impact of 3 cents).

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended upward during the past month.

VGM Scores

At this time, Equifax has an average Growth Score of C, though it is lagging a bit 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.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Equifax has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.