It has been about a month since the last earnings report for Equifax (EFX). Shares have added about 7.5% 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 the most recent earnings report in order to get a better handle on the important drivers.
Adjusted earnings came in at $1.81 per share, beating the Zacks Consensus Estimate by 4% and increasing 19.1% from the year-ago figure. Total revenues of $1.33 billion beat the consensus estimate by 1.1% and increased 10.7% from the year-ago figure on a reported basis and 14% on a local currency basis.
Segmental Information
Revenues in the Workforce Solutions segment totaled $559.5 million, up 10% from the year-ago quarter’s figure and beating our estimated $551.2 million. Within the segment, Verification Services’ revenues of $457.1 million increased 15% year over year. Employer Services’ revenues of $102.4 million indicate a 7% year-over-year decline.
Revenues in the USIS segment were $427.7 million, up 5% from the year-ago quarter’s level and beating our estimated $422.2 million. Within the segment, Online Information Solutions’ revenues of $327.5 million were up 6% from the year-ago quarter’s figure. Mortgage Solutions’ revenues of $22.9 million declined 12% year over year. Financial Marketing Services’ revenues were $77.3 million, which increased 7% year over year.
Revenues in the International division totaled $339.3 million, gaining 20% and 22% year over year on a reported basis and a local-currency basis, respectively. Asia Pacific revenues of $82.2 million declined 3% from the year-ago reported figure on a reported basis and 2% on a local-currency basis.
Revenues from Europe amounted to $93.6 million, up 15% year over year on a reported basis and 9% on a local currency basis. Latin America revenues of $98.6 million grew 85% year over year on a reported basis and more than 100% on a local-currency basis. Canada revenues of $64.9 million were up 1% year over year, both on a reported basis and a local-currency basis.
Operating Results
Adjusted EBITDA in the fourth quarter of 2023 totaled $446.6 million, reflecting a 20% increase from the year-ago quarter’s level. Adjusted EBITDA margin was 33.7%, which increased 260 basis points from the year-ago reported figure.
Workforce Solutions’ adjusted EBITDA margin was 51.2% compared with 46.8% a year ago. Adjusted EBITDA margin for the USIS division was 35.1% compared with 35.3% in the year-ago quarter. Adjusted EBITDA margin for the International segment was 31.2% compared with 25.8% in the year-ago quarter.
Balance Sheet & Cash Flow
EFX exited the fourth quarter with cash and cash equivalents of $216.8 million. Equifax generated $322.1 million in cash from operating activities in the quarter. The company has a long-term debt of $4.74 billion, down from the quarter-ago reported figure of $5.5 billion. Capital expenditures were $145.7 million. The company distributed $48.1 million as dividends during the quarter.
Q1 and 2024 Outlook
For the first quarter of 2024, revenues are expected to be in the $1.375-$1.395 billion band. Adjusted earnings per share are expected to be in the range of $1.33-$1.43. For 2024, revenues are expected in the range of $5.67-$5.77 billion. Adjusted EPS is expected to be in the range of $7.2-$7.5.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month.
The consensus estimate has shifted -21.48% due to these changes.
VGM Scores
Currently, Equifax has an average Growth Score of C, though it is lagging a lot on the Momentum Score front with an F. However, 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 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 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.
Performance of an Industry Player
Equifax is part of the Zacks Financial Transaction Services industry. Over the past month, Western Union (WU), a stock from the same industry, has gained 16.6%. The company reported its results for the quarter ended December 2023 more than a month ago.
Western Union reported revenues of $1.05 billion in the last reported quarter, representing a year-over-year change of -3.6%. EPS of $0.37 for the same period compares with $0.32 a year ago.
Western Union is expected to post earnings of $0.40 per share for the current quarter, representing a year-over-year change of -7%. Over the last 30 days, the Zacks Consensus Estimate has changed +1.5%.
Western Union has a Zacks Rank #3 (Hold) based on the overall direction and magnitude of estimate revisions. Additionally, the stock has a VGM Score of C.
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