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Equifax Provides Upbeat Business Update; Needham Lifts PT
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Equifax Provides Upbeat Business Update; Needham Lifts PT

Equifax provided a positive business update on December 8 that highlighted an improving operating environment and bullish expectations on earnings and revenue for both Q4 2020 and FY 2021.

Q4 revenue is expected to be between $1.065 billion and $1.085 billion, which is above the previous estimate of between $990 million and $1.01 billion. EPS has also been revised to the upside and is now expected to be within the $1.75 – $1.85 range, from $1.40 – $1.50.

Equifax (EFX) cites acceleration in both mortgage and non-mortgage aspects of the US B2B business, outsized growth in EFX Workforce Solutions and improving macro-economic trends as the reasons for the guidance raise.

Preliminary estimates for 2021 have also been revised upward despite a $0.90 strain from one-time transformation costs due to the transition of technology systems. These will result in significant cost savings beginning in FY22. (See EFX stock analysis on TipRanks)

Currently, the analyst consensus is a Moderate Buy, based on 7 Buy ratings and 5 Hold ratings. The average price target is $199.63, which implies upside potential of around 10%.

In response, Needham analyst Kyle Peterson reiterated his Buy recommendation on EFX, raising his price target from $200 to $210. He believes that EFX shares are trading at a discount to its peers, and that the company’s workforce solutions differentiate it from its closest competitors. Peterson also argues that EFX stock offers investors looking for exposure to financial data a favorable investment opportunity.

The $210 price target is based on a P/E multiple for FY22 of approximately 28x, and Peterson believes that this is warranted as EFX is considered a leading credit bureau, with expanding demand for income and employment data expected to drive solid revenue growth going forward.

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