Why Is Equifax Up 11.1% Since Last Earnings Report?

A month has gone by since the last earnings report for Equifax EFX. Shares have added about 11.1% 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 its most recent earnings report in order to get a better handle on the important catalysts.

Equifax Beats on Q2 Earnings 

Equifax reported impressive second-quarter 2024 results, wherein earnings and revenues surpassed the Zacks Consensus Estimate.

EFX's adjusted earnings (excluding 51 cents from non-recurring items) were $1.82 per share, outpacing the Zacks Consensus Estimate by 5.8% and increasing by 6.4% on a year-over-year basis. Total revenues of $1.4 billion surpassed the consensus estimate by a slight margin and jumped 8.6% from the year-ago quarter.

Segmental Information

Revenues in the Workforce Solutions segment totaled $612.9 million, increasing 5% from the year-ago quarter and beating our expectation of $600.2 million. Within the segment, Verification Services' revenues of $515.9 million were up 9% year over year. Employer Services' revenues of $97 million declined 11% on a year-over-year basis.

USIS segment's revenues were $478.3 million, grew 7% from the year-ago quarter and missing our anticipation of $481.9 million. Within the segment, Online Information Solutions' revenues of $377.8 million increased 5% year over year. Mortgage Solutions' revenues of $40.4 million jumped 33% from the year-ago quarter. Financial Marketing Services' revenues were $60.1 million, which increased 7% on a year-over-year basis.

Revenues in the International division amounted to $339.3 million, up 17% and 28% year over year on a reported basis and a local currency basis, respectively. The metric missed our estimate of $347.7 million.

Latin America's revenues of $97.3 million surged 71% from the year-ago quarter on a reported basis and more than 100% on a local currency basis. Revenues from Europe amounted to $88.2 million, up 12% year over year on a reported and local currency basis. Canada's revenues of $69.2 million increased 4% year over year on a reported basis and 6% on a local currency basis. Revenues from Asia Pacific were $84.6 million, declining 4% from the year-ago quarter on a reported basis and 2% on a local currency basis.

Operating Results

Adjusted EBITDA in the second quarter of 2024 amounted to $457.7 million, reflecting a 6.1% increase from the year-ago quarter. The adjusted EBITDA margin was 32%, which declined 70 basis points from the year-ago quarter.

Workforce Solutions' adjusted EBITDA margin was 52.8% compared with 51.5% a year ago. Adjusted EBITDA margin for the USIS division was 33.2% compared with 36% in the second quarter of 2023. The adjusted EBITDA margin for the international segment was 25.6% in comparison with 24.2% in the year-ago quarter.

Balance Sheet & Cash Flow

EFX exited the second quarter with cash and cash equivalents of $181.9 million, compared with $201 million at the end of the first quarter of 2024. The company has a long-term debt of $4.7 billion, flat with the preceding quarter.

Cash generated from operating activities amounted to $267.5 million, whereas capital expenditure totaled $136.7 million. The company distributed $48.2 million as dividends in the quarter.

Q3 and 2024 Outlook

For the third quarter of 2024, EFX raised its revenue guidance to $1.43-$1.45 billion compared with $1.41-$1.43 billion mentioned previously. It raised the guidance for adjusted earnings per share to $1.75-$1.85 compared with $1.65-$1.75 previously.

For 2024, Equifax raised revenue guidance to $5.69-$5.75 billion compared with $5.67-$5.77 billion previously. The company reduced the adjusted EPS guidance to $7.22-$7.47 compared with $7.2-$7.5 previously.

How Have Estimates Been Moving Since Then?

It turns out, estimates revision have trended downward during the past month.

The consensus estimate has shifted -9.82% due to these changes.

VGM Scores

Currently, 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 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.

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