Shares of Equifax (EFX) have generated a return of 9.6% over the last 3 months.
Equifax is a leading information services provider to consumers and businesses. The recent price appreciation can be attributed to the company’s offerings, which help customers to understand, manage and protect their clients’ information and take informed financial decisions. We believe that a solid product portfolio and experience within the sector will keep Equifax ahead of its peers.
Equifax also serves a wide range of industries, such as financial, mortgage, consumer, commercial, telecommunications, retail, human resources and automotive. This diversified client base is extremely beneficial as weakness in any sector can be balanced with strength in the others.
Recently, to increase shareholder value, Equifax has authorized a new share buyback plan of $400 million. Equifax added that the new buyback plan will be in addition to the $141.7 million remaining under its present plan. The repurchase initiative strengthens Equifax’s commitment to increase value for its shareholders. Per company records, Equifax has returned $2.4 billion through share buybacks and dividends over the last 10-year period.
Additionally, the company has made strategic acquisitions to supplement its core business. In Jan 2014, Equifax acquired TDX Group, a U.K.-based debt-management firm, for $327.0 million. We believe that the acquisition will enable Equifax to provide a broad insight into consumer performance, financial status, capabilities of customers and market opportunities. Moreover, it will further solidify Equifax’s presence in the U.K., which in turn will boost its revenues.
It is also worth noting that Equifax delivered a positive earnings surprise of 2.1% in the last reported quarter on revenue that was in line with the Zacks Consensus Estimate. Broad-based strength across segments helped revenues grow from the year-ago quarter.
Solid Growth Outlook
Equifax’s strong growth prospects have boosted investor sentiment as well.
Management’s optimism is reflected in the EPS guidance of 96–99 cents and top-line guidance of $620–625 million for third-quarter 2014. The Zacks Consensus Estimate for revenues and earnings are pegged at $623 million and 99 cents, respectively. Moreover, Equifax is expected to generate revenues of about $2.44–2.47 billion and EPS of $3.83–3.91 in 2014. The Zacks Consensus Estimate for revenues and earnings are pegged at $2.455 billion and $3.88 per share, respectively. The yearly guidance is higher than previously estimated revenues of $2.43–2.48 billion and EPS of $3.75–3.89.
Management’s efforts such as strategic initiatives for product innovation, expansion of data assets through acquisitions and continuous share gains in North America were the encouraging points in the quarter.
Given the company’s strong correlation to consumer and financial markets as well as its U.S. and European exposure, we expect a gradual improvement in results. Moreover, the improving mortgage environment could be a positive for the stock. However, stiff competition from Automatic Data Processing Inc (ADP), Paychex, Inc. (PAYX) and Moody’s Corp. (MCO) and uncertainty in the mortgage sector are concerns.
Currently, Equifax has a Zacks Rank #2 (Buy).
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