We expect Equifax Inc. EFX to beat expectations when it reports first-quarter 2016 results on Apr 27.

Why a Likely Positive Surprise?

Our proven model shows that Equifax is likely to beat earnings because it has the right combination of two key ingredients.

Zacks ESP: The Earnings ESP, which represents the difference between the Most Accurate estimate and the Zacks Consensus Estimate, is 1.74%. This is very meaningful and a leading indicator of a likely positive earnings surprise for the company.

Zacks Rank: Equifax carries a Zacks Rank #2 (Buy). Note that stocks with a Zacks Rank #1 (Strong Buy), #2 or #3 (Hold) have a significantly higher chance of beating earnings. Sell-rated stocks (#4 or #5), on the other hand, should never be considered going into an earnings announcement, especially when the company is witnessing negative estimate revisions.

The combination of Equifax Zacks Rank #2 and 1.74% ESP makes us reasonably confident of an earnings beat on Apr 27.

The stock closed at $115.71 last Friday. We expect a Q1 earnings beat to positively influence the stock price.

What is driving the Better-than-Expected Earnings?

Equifax is a leading information services provider for consumers and businesses. The company reported better-than-expected fourth-quarter 2015 results, which also showed a year-over-year improvement. Backed by the strong results, Equifax raised its full-year earnings outlook and issued an encouraging guidance for the first quarter.

Management’s efforts, such as strategic initiatives for product innovation, expansion of data assets through acquisitions, and continuous share gains in North America, are encouraging. Also, Equifax’s strong correlation to consumer and financial markets, along with its exposure to the U.S. and European markets are likely to fuel growth, going ahead. We believe that these factors will boost the company’s performance in the to-be-reported quarter.

Notably, Equifax has been pursuing strategic acquisitions to supplement its core business. During the first quarter, the company acquired Veda Group Limited, a leading Australian credit information provider, which should be accretive to its bottom line.

Moreover, in 2014, Equifax acquired two companies – TDX Group, a UK-based debt management firm, and Forseva, a provider of cloud-based credit management software solutions. The company expects to derive 1–2% revenue growth from these buyouts over the long term.

Apart from this, Equifax expands internationally through joint ventures that contain its operating costs and do not require integration time while diversifying the revenue source.

However, intense competition from peers such as Automatic Data Processing Inc. ADP, Fiserv Inc., Moody’s Corp., and uncertainty in the mortgage sector remain major concerns.

Other Stocks to Consider

Here are a few other companies which you may consider, as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Barracuda Networks Inc. CUDA, with an Earnings ESP of +200.00% and a Zacks Rank #1.

Benefitfocus Inc. BNFT, with an Earnings ESP of +4.00% and a Zacks Rank #1.

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