Why Is TransUnion (TRU) Down 41.2% Since Last Earnings Report?

A month has gone by since the last earnings report for TransUnion (TRU). Shares have lost about 41.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is TransUnion due for a breakout? 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 drivers.

TransUnion Tops Q4 Earnings & Revenue Estimates

TransUnion reported solid fourth-quarter 2019 results, wherein its earnings and revenues surpassed the Zacks Consensus Estimate.

Adjusted earnings of 75 cents per share outpaced the consensus mark by 5.6% and improved 13.6% year over year. The reported figure exceeded the company’s guided range of 69-71 cents.

Total revenues of $685.6 million beat the consensus mark by 1.7% and increased 11.8% year over year on a reported basis, 12% on a constant-currency basis as well as on an organic constant-currency basis.

Adjusted revenues (excluding the impact of deferred revenue purchase accounting reductions and other adjustments to revenues for the company’s recently acquired entities) came in at $685.6 million, up 10% year over year on a reported basis, at constant currency and at organic constant currency. The reported figure exceeded the company’s guided range of $667-$672 million.

Revenue Growth Across All Segments

The U.S. Markets revenues of $415 million increased 12% year over year on a reported basis as well as on an organic basis. Within the segment, Financial Services revenues of $222 million increased 16% year over year on a reported and organic basis. Emerging Verticals revenues, including Healthcare, Insurance and all other verticals, were $193 million, up 8% year over year on a reported basis and 7% on an organic basis.

International revenues rose 18% year over year on a reported basis and 19% on a constant-currency basis to $166 million. Adjusted revenues also came in at $166 million, up 10% year over year on a reported basis and 11% on a constant-currency basis. Revenues from Canada, United Kingdom, Africa, India and Asia Pacific increased year over year on a reported as well as constant-currency basis.

Revenues at the Consumer Interactive segment improved 2% from the prior-year quarter figure to $123 million.

Operating Results

Adjusted EBITDA was $275 million, up 11% year over year on a reported basis, constant-currency basis and organic constant-currency basis. Adjusted EBITDA margin came in at 40.2% compared with 39.9% in the prior-year quarter.

Balance Sheet and Cash Flow

TransUnion had $274.1 million in cash and cash equivalents at the end of fourth-quarter 2019 compared with $235.9 million at the end of the prior quarter. Long-term debt was $3.59 billion, compared with $3.65 billion in the prior quarter. The company generated $196.3 million in cash from operating activities and CapEx was $66.4 million. The company paid out $14.2 million in dividends in the quarter.

Q1 Outlook

For the first quarter of 2020, TransUnion expects adjusted revenues between $681 million and $685 million, suggesting an improvement of 9-10% year over year. Adjusted EPS is expected between 69 cents and 70 cents, indicating a rise of 15-17% year over year. Adjusted EBITDA is anticipated in the range of $261-$264 million, suggesting an increase of 9-10%.

2020 View

TransUnion unveiled its 2020 guidance. The company now expects adjusted revenues between $2.857 billion and $2.872 billion, indicating year-over-year increase of 7-8%. Adjusted EPS is anticipated in the band of $3.14-$3.18, suggesting improvement of 13-14%. Adjusted EBITDA is expected in the range of $1.141-$1.151 million, indicating year-over-year increase of 8-9%.

How Have Estimates Been Moving Since Then?

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

VGM Scores

Currently, TransUnion has an average Growth Score of C, a grade with the same score on the momentum front. Charting a somewhat similar path, 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 trending upward for the stock, and the magnitude of these revisions has been net zero. It comes with little surprise TransUnion has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.