We have upgraded our long-term recommendation on
Equifax Inc.
(
EFX
) to Outperform from Neutral based on the company's upbeat third
quarter 2012 results and market share gains in its mortgage
solutions portfolio.
Equifax generated strong revenues in its third quarter of 2012 on
the back of 35.0% year-over-year growth in Mortgage Solutions
revenue. The company also expects mortgage activities to maintain
momentum in the coming quarters as home sales should continue to
trend up. Equifax noticed market share gains in the mortgage
sector, aided by its newly-launched products and services. Hence,
it is expected that strength in its mortgage solutions portfolio
will be a key catalyst in the near term.
Better mortgage activities and strong performance of non-mortgage
revenues led to 16.0% year-over-year growth in earnings per share
of 75 cents.
Though the fourth quarter guidance was not very encouraging, we
believe that there is adequate growth potential given Equifax'
expanding geographical reach and the recent takeover of
Computer Sciences Corp.
's (
CSC
) Credit Services business. As Equifax had been handling CSC's
business for many years, it will take lesser time to integrate
the business within its USCIS segment. The deal will be accretive
to earnings per share in 2013.
Headquartered in Atlanta, Georgia, Equifax is one of the leaders
in facilitating and securing commerce through proprietary
databases containing information on approximately 400 million
consumers and businesses worldwide. Equifax helps businesses to
identify customers largely based on credit profiles and to reach
out to them.
We believe that Equifax's leading market position in North
America and Europe could give the shares a boost going forward.
We also think Equifax' growing exposure in Brazil, which is one
of the faster-growing markets in the world, is encouraging. To
tap the immense growth opportunity in the Brazilian credit data
market, Equifax merged credit reporting operations of its
Brazilian subsidiary with Boa Vista Servicos S.A., the
second-largest consumer credit bureau in Brazil. But Equifax may
face some problem with market share gains of its archrival
Experian plc in Brazil.
Overall, we see the company's service tie-ups with a wide range
of industries, lesser customer concentration risks and improving
mortgage situation in the U.S. to be positive.
Estimate Revision Trend
Over the last 60 days, all the 11 estimates for fiscal 2012 were
raised. Also, 8 out of the 11 estimates were moved upward for
fiscal 2013. The magnitude of estimate increased by a penny to
$2.95 for fiscal 2012, but was up 34 cents to $3.54 for fiscal
2013 in the last 60 days.
Currently, Equifax has a Zacks #2 Rank (Buy).
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