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Equifax's (EFX) Q1 Earnings Beat Estimates, Revenues Lag

Equifax Inc. EFX reported mixed first-quarter 2019 results, with earnings beating the Zacks Consensus Estimate but revenues missing the same.

Adjusted earnings of $1.20 per share beat the consensus mark by a penny but declined 16% on a year-over-year basis. Earnings came in at the higher end of the guided range of $1.15-$1.20. Costs associated with the cybersecurity incident weighed on the bottom line.

Revenues totaled $846.1 million, which lagged the Zacks Consensus Estimate by roughly $2 million. Revenues fell 2% year over year on a reported basis but increased 1% on a local currency basis. Revenues came below the midpoint of the guided range of $840-$855 million. Weakness in the USIS, International and Global Consumer Solutions segments resulted in the year-over-year downside. This was partially offset by strength in the Workforce Solutions segment.

The stock has gained 27.8% year to date, outperforming the 25.3% rally of the industry it belongs to.

 

Let’s check out the numbers in detail.

Segmental Revenues

Revenues in the USIS division came in at $298.3 million, down 3% from the year-ago quarter’s number. Within the division, Online Information Solutions revenues of $217.7 million were down 1% year over year. Mortgage Solutions revenues of $32.2 million declined 23% year over year. Financial Marketing Services revenues came in at $48.4 million, up 6% year over year. The segment contributed 35% to total revenues.

Revenues in the International division totaled $225.1 million, down 8% year over year on a reported basis but up 2% on a local currency basis. Equifax reported year-over-year revenue decline of 11%, 16% and 3% in Asia Pacific, Latin America and Europe, respectively. On a local currency basis, revenues from Asia Pacific declined 3%, while that from Europe and Latin America grew 4% and 5%, respectively. Canada revenues rose 2% year over year on a reported basis and 8% on a local currency basis. The International segment contributed 27% to total revenues.

Revenues in the Workforce Solutions segment totaled at $228.5 million, up 8% from the year-ago quarter’s figure. Within the segment, Verification Services revenues of $148.9 million were up 16% year over year. Employer Services revenues of $79.6 million were down 4% year over year. Workforce Solutions contributed 27% to total revenues.

Revenues in the Global Consumer Solutions segment amounted to $94.2 million, down 9% year over year on a reported basis and 8% on a local currency basis. The segment contributed 11% to total revenues.

Equifax, Inc. Revenue (TTM)

Operating Results

Adjusted EBITDA in the first quarter fell 11% year over year to $258.2 million. Adjusted EBITDA margin was 30.5% compared with 33.5% in the year-ago quarter.

Adjusted EBITDA margin for USIS was 42.9% compared with 44.1% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 25.3% compared with 29.4% in the prior-year quarter. Workforce Solutions’ adjusted EBITDA margin was 49.4% compared with 48.9% a year ago. Adjusted EBITDA margin for Global Consumer Solutions was 23.9% compared with 33.8% in the year-ago quarter.

Balance Sheet and Cash Flow

Equifax exited the first quarter with cash and cash equivalents of $133.2 million, lower than $223.6 million in the prior quarter. Long-term debt at the end of the quarter was $2.7 billion, higher than $2.6 billion in the previous quarter. The company generated $31 million of cash from operating activities and capex was $114.8 million. Also, Equifax paid dividend of $47.1 million to shareholders in the quarter.

Guidance

For the second quarter of 2019, Equifax expects revenues in the range of $865-$880 million, indicating year-over-year local currency growth of 0.5-2.5%. The guided range is much below the Zacks Consensus Estimate of $887.8 million. Adjusted EPS is anticipated to be between $1.32 and $1.37, far below the Zacks Consensus Estimate of $1.50.

For 2019, revenues are expected between $3.425 billion and $3.525 billion, the midpoint ($3.475 billion) of which is below the Zacks Consensus Estimate of $3.490 billion. Adjusted EPS is anticipated to be between $5.60 and $5.80, the midpoint ($5.70) of which is above the Zacks Consensus Estimate of $5.66.

Zacks Rank & Stocks to Consider

Equifax currently carries a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader Zacks Business Services sector are WEX WEX, Automatic Data Processing ADP and FLEETCOR FLT. While WEX sports a Zacks Rank #1 (Strong Buy), Automatic Data Processing and FLEETCOR carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term expected EPS (three to five years) growth rate for WEX, Automatic Data Processing and FLEETCOR is 15%, 13% and 16.5%, respectively.

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