) has posted third quarter 2012 adjusted earnings per share (EPS)
of 75 cents, surpassing the Zacks Consensus Estimate by 3 cents.
Results were up 16.0% from the year-ago quarter. The adjusted EPS
excludes the impact of acquisition-related amortization expense,
net of tax. Management attributed the improvement to better
mortgage activities and strong performance of non-mortgage
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Revenue grew 10.9% year over year to $543.9 million. The revenue
figure was at the higher end of the company's expected growth
range and above the Zacks Consensus Estimate of $540.0 million.
The upside could be attributed to top-line growth across the
board, partially offset by lackluster performance of the
International segment. As per management, the revenue growth
reflected solid payback from investments in new product
innovations and penetration into new markets.
Segment wise, total U.S. Consumer Information Solutions (USCIS)
revenue was $233.3 million, up 15.0% from the year-ago quarter.
Among sub-segments, strong growth was noticed in Mortgage
Solutions Services (up 35.0%), followed by Online Consumer
Information Solutions (up 16.0%). The company witnessed a
deceleration in its Consumer Financial Marketing Services segment
Total International (including Europe, Canada and Latin America)
revenue grew 2.0% year over year to $121.0 million, mostly due to
a 4.0% growth recognized in Latin America and 3.0% in Europe. The
Canada Consumer segment remained unchanged in U.S. dollar terms.
Revenue from the Total Workforce Solutions segment increased
14.0% year over year to $117.0 million. The upside resulted from
a 33.0% year-over-year increase in Verification Services revenue,
partially offset by a 5.0% decline in Employer Services revenue.
North American Personal Solutions contributed $51.4 million,
reflecting 13.0% year-over-year improvement. North American
Commercial Solutions generated $21.2 million, down 2.0% from the
Gross margin in the third quarter was 61.7%, down 20 basis points
from the year-ago quarter. Operating margin was 24.3% as against
24.8% a year ago. The margin performance was better in USCIS and
Workforce Solutions, offset by weak performances of
International, North America Personal Solutions and North America
Commercial Solutions segments.
The company reported higher operating expenses with selling,
general and administrative expenditure increasing 14.9% year over
year. Depreciation and amortization expenses remained unchanged
at $40.5 million.
On a GAAP basis, net income from continuing operations was $77.9
million or 64 cents per share versus $66.7 million or 54 cents
per share in the comparable quarter last year. Excluding the
impact of acquisition-related amortization expense, net of tax,
adjusted net income was $92.2 million or 75 cents per share, up
16.0% from $80.5 million or 65 cents in the year-ago quarter.
Balance Sheet, Cash Flow
Equifax exited the quarter with $267.2 million in cash and cash
equivalents, up from $183.1 million in the previous quarter.
Accounts receivables were $296.9 million. Total long-term debt
was $968.3 million, down from $968.8 million in the prior
quarter. Cash provided by operating activities was $151.7
million, compared with $152.1 million in the prior quarter.
During the third quarter, Equifax bought back 0.7 million of
common shares for $33.9 million. As of September 30, 2012,
roughly $227.1 million worth shares remain under the current
authorization. Equifax paid a quarterly dividend of 18 cents per
For the fourth quarter of 2012, Equifax expects revenue to be up
8.0% to 10.0% from the year-ago quarter, based on contributions
from domestic and international businesses and ongoing foreign
exchange rates. Excluding the impact of acquisition-related
amortization expense, Equifax expects adjusted earnings per share
to range between 72 cents and 76 cents. The Zacks Consensus
Estimate for the fourth quarter is 73 cents, which is toward the
lower end of the company's guidance.
Equifax exited the third quarter with flying colors, surpassing
the Zacks Consensus Estimates both on the top and bottom lines.
We are optimistic about Equifax' revenue growth prospects and
improving margins, as reflected in its guidance.
Management's efforts regarding strategic initiatives for product
innovation, broadening data assets through acquisitions and
continuous share gains in North America were encouraging.
Given the company's strong correlation to consumer and financial
markets, as well as its U.S. and European exposure, we see a
gradual improvement in results. But stiff competition from
Automatic Data Processing Inc.
) is a concern.
Currently, Equifax has a Zacks #3 Rank implying a short-term