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Why Equifax Stock Popped After Earnings

By Rich Smith - Apr 22, 2021 at 12:30PM

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Equifax beat estimates in the first quarter, and predicts more earnings beats to come.

What happened

Shares of credit rater Equifax (EFX 2.06%) jumped on the day after reporting earnings last night, and were up 16.8% at 12:20 p.m. EDT today.

Heading into earnings, analysts had forecast Equifax would earn $1.53 per share, pro forma, for its fiscal first quarter 2021, on sales of $1.1 billion. In fact, Equifax reported pro forma profits of $1.97 per share, on sales of $1.2 billion.  

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Image source: Getty Images.

So what

This sales number was Equifax's highest-ever quarterly revenue, the company said. That was powered by 19% growth in B2B USIS revenue and 59% growth in Workforce Solutions revenue. And supplemented by new revenue streams from bolt-on acquisitions of Kount, HIREtech, i2Verify, AccountScore, and CreditWorks, Equifax's sales grew 27% year over year. The company also noted that these non-mortgage market-dependent revenue streams "continued to significantly outpace the strong U.S. mortgage market."  

On the subject of profits, although GAAP earnings of $1.64 per share weren't quite as strong as the headline pro forma number, Equifax noted that these GAAP profits did grow 72% year over year. Free cash flow for the quarter turned positive: about $30.4 million.

Now what

Management forecasts that sales will continue to grow, albeit at a slower pace, as the year progresses. Revenue is expected to rise 17% to about $1.15 billion in the second quarter, with pro forma profits of about $1.65 per share. (Analysts are only looking for $1.49.)

For the full year, management says it is confident it can achieve sales growth in excess of 11% to more than $4.6 billion, well ahead of the $4.4 billion that Wall Street is expecting. Pro forma profits should similarly range from $6.75 to $7.05 per share, also ahead of estimates, and potentially more than the $6.97 Equifax reported in fiscal 2020.  

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