Equifax Earnings: Steady Quarter and Intact Outlook

Equifax EFX started the year on solid footing. Revenue of $1.30 billion and adjusted EPS of $1.43 beat the FactSet consensus estimates of $1.28 billion and $1.37 and the company’s guidance of $1.27 billion-$1.29 billion and $1.30-$1.40. In addition, Equifax maintained its full-year revenue and adjusted EPS outlook even as economic uncertainty rises. Following the earnings release, the shares are trading roughly 4 percentage points above the Morningstar US Market Index; we attribute the positive reaction to easing market concerns around recent banking issues affecting the credit bureaus. We note that Equifax has little exposure to regional banks and that larger banks have seen mostly stable deposit bases. Overall, there was little that would change our long-term view of the firm, and we will maintain our wide moat rating and $315 fair value estimate.

Workforce solutions, Equifax’s largest segment, saw organic revenue decline 9% as a 38% drop in mortgage revenue more than offset a 16% increase in nonmortgage verification revenue and a 1% organic decrease in employer services revenue. Workforce solutions’ mortgage revenue decline was still much better than the industrywide 58% decline in mortgage origination volume as record growth, pricing, and penetration continue to benefit Equifax. Predictably, talent solutions revenue growth slowed as hiring slowed. Despite headlines of large layoffs, Equifax has not seen an uptick in revenue from its unemployment claims processing business.

The U.S. credit bureau segment saw business-to-business organic nonmortgage revenue grow 3%. Equifax saw strong growth in commercial, auto, fraud, and insurance with softness at smaller financial institutions and financial technology firms. Trends in the firm’s international business were solid with 8% organic constant-currency revenue growth. Emerging markets (Latin America and India), which we view as having a long runway, were particularly strong.