Equifax Posts a Decent 4Q - Analyst Blog
February 09 2012 - 3:00AM
Zacks
Equifax Inc. (EFX)
has posted fourth quarter 2011 adjusted earnings per share (EPS) of
68 cents, inching past the Zacks Consensus Estimate by a penny.
Results were up 9.7% from 62 cents reported in the year-ago
quarter. The adjusted EPS excludes acquisition-related amortization
expense. Management attributed the improvement to diverse product
offerings which expanded Equifax’ scope within the market.
Revenue
Revenue grew 5.7% year over year to
$509.7 million. The upside could be attributed to top-line growth
across the board, partially offset by lackluster performance by the
International segment.
Segment wise, total U.S. Consumer
Information Solutions (USCIS) revenue was $215.6 million, up 13.0%
from the year-ago quarter. Among sub-segments, strong growth was
noticed in Online Consumer Information Solutions (17.0%), followed
by Mortgage Solutions Services (13.0%). The company witnessed a
relatively slower growth rate in its Consumer Financial Marketing
Services segment (2.0%).
Total International (including
Europe, Canada and Latin America) revenue slid 8.0% year over year
to $116.3 million. Of this, Latin America decreased 26.0%, Europe
grew 15.0%, and the Canada Consumer segment climbed 3.0% in U.S.
dollar terms.
Revenue from the TALX segment
increased 3.0% year over year to $105.8 million. The upside
resulted from an 11.0% year-over-year increase in T Verification
Services revenue and Employer Services revenue.
North American Personal Solutions
contributed $45.6 million, reflecting a 21.0% year-over-year
improvement. North American Commercial Solutions brought in $26.4
million, up 6.0% from the year-ago quarter.
Operating
Results
Gross margin in the fourth quarter
was 61.9%, up from 59.9% in the year-ago quarter. Operating margin
was 24.7% as against 22.8% a year ago. The margin performance was
better in USCIS, International and North America Commercial
Solutions, partially offset by weak performances by North America
Personal Solutions and TALX.
The company reported higher
operating expenses with selling, general and administrative
expenditure increasing 8.5% year over year, partially offset by a
1.9% decline in depreciation and amortization expenses.
On a GAAP basis, net income from
continuing operations was $72.9 million or 60 cents per share
versus $62.2 million or 50 cents per share in the comparable
quarter last year. Excluding the impact of acquisition-related
amortization expense (net of tax) and a tax benefit, adjusted net
income was $83.0 million or 68 cents per share, compared with $76.9
million or 62 cents per share in the year-ago quarter.
Balance Sheet, Cash Flow
& Share Repurchase
Equifax exited the quarter with
$127.7 million in cash and cash equivalents, up from $102.0 million
in the previous quarter. Accounts receivables were $284.4 million.
Total long-term debt was $1.01 billion, down from $1.04 billion in
the prior quarter. Cash provided by operating activities was $149.7
million, compared with $112.0 million in the prior quarter.
The company bought back 1.9 million
of it common shares for $67.1 million during the quarter. At
December 31, 2011, the remaining authorization for future share
repurchases was $112.1 million.
Guidance
For the first quarter of 2012,
Equifax expects revenue to be up 9.0% to 12.0% from the year-ago
quarter, based on contributions from domestic and international
businesses and the ongoing foreign exchange rates. Excluding the
impact of acquisition-related amortization expense, Equifax expects
adjusted earnings per share to range between 64 cents and 67 cents.
The Zacks Consensus Estimate for the first quarter is 65 cents,
which is at the higher end of the company’s guidance.
Our Take
We are not very excited about the
company’s fourth quarter performance, which marginally surpassed
the Zacks Consensus Estimate on the bottom line. But we are
optimistic about revenue growth prospects and improving margins
through fiscal 2012.
Management’s efforts regarding
strategic initiatives around product innovation, broadening data
assets through acquisitions and continuous share gains in North
America were encouraging.
However, given the company’s strong
correlation to consumer and financial markets, as well as its U.S.
exposure, we see a gradual improvement in results. But stiff
competition from Automatic Data Processing Inc.
(ADP) is a concern.
Currently, Equifax has a Zacks #3
Rank implying a short-term Hold rating.
AUTOMATIC DATA (ADP): Free Stock Analysis Report
EQUIFAX INC (EFX): Free Stock Analysis Report
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