Equifax Inc. (EFX) reported second-quarter 2014 adjusted earnings per share from continuing operations of 96 cents, which came ahead of the Zacks Consensus Estimate by a couple of cents. Earnings were up 4.4% from the year-ago quarter.

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Quarter Details

Equifax’s revenues of $613.9 million were up 4.6% year over year and were relatively in line with the Zacks Consensus Estimate. The year-over-year increase resulted from revenue growth in most of its business segments.

Segment-wise, total U.S. Consumer Information Solutions revenues were up 2.0% from the year-ago quarter to $264.1 million. Among sub-segments, growth was recorded in the Consumer Financial Marketing Services segment (up 7.0%) and Online Consumer Information Solutions (up 4.0%), which offset the 15.0% revenue decline in the Mortgage Solutions Services.

International revenues (including Europe, Canada and Latin America) were up 18.0% year over year to $153.4 million, primarily due to 53.0% growth in the Europe segment which more than offset the 3.0% decline in revenues from Canada Consumer segment and 1.0% decline in revenues from Latin America. Revenues from Europe included the contribution from the TDX Group acquisition.

Revenues from the Workforce Solutions segment fell 3.0% on a year-over-year basis to $119.4 million, primarily due to a 6.0% decline in revenues from Verification Services which more than offset a 1.0% increase in revenues from Employer Services.

North American Personal Solutions contributed $54.0 million to revenues, reflecting a 5.0% year-over-year improvement. North American Commercial Solutions generated $23.0 million of revenues, and were up 1.0% on year-over-year basis.

Equifax’s operating margins came in at 27.3% compared with 26.9% reported in the year-ago quarter, primarily due to the effect of the acquisitions. Adjusted net income came in at $119.7 million or 96 cents per share compared with $113.4 million or 92 cents reported in the year-ago quarter.

Equifax exited the quarter with $91.7 million in cash and cash equivalents, compared with $101.4 million in the previous quarter. Total long-term debt (including current portion) stood at $1.56 billion. During the quarter, the company paid dividends per share of 25 cents and repurchased stocks worth $49.0 million.

Guidance

Considering the recent domestic and international business activities, current foreign exchange rates and the expected slowdown in mortgage activities, management expects revenues in the third quarter to range between $620.0 million and $625.0 million (mid-point $622.5 million), while the Zacks Consensus Estimate is pegged at $621.0 million. Earnings are forecasted between 96 cents and 99 cents (mid-point 97.5 cents). The Zacks Consensus Estimate is pegged at 98 cents.

Equifax also provided its fiscal 2014 forecast. The company expects is revenues to range between $2.440 billion and $2.465 billion and earnings in the range of $3.81 to $3.91 per share. The Zacks Consensus Estimate for revenues is pegged at $2.455 billion while that for earnings stands at $3.84.

Our Take

Equifax reported modest second-quarter results. While the bottom line beat the Zacks Consensus Estimate, the top line came in line with the consensus mark. Nonetheless, the company’s revenues increased on a year-over-year basis aided by strong growth across most of its business segments. The company also provided a modest third-quarter and fiscal 2014 guidance.

Management’s efforts such as strategic initiatives for product innovation, expansion of 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. Moreover, improving mortgage environment could be a positive for the stock. However, stiff competition from Automatic Data Processing Inc. (ADP), Fiserv Inc. (FISV), Moody’s Corp. (MCO) and uncertainty in the mortgage sector are the concerns.

Currently, Equifax has a Zacks Rank #2 (Buy).

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