Equifax: After the Breach

03/02/2020 5:00 am EST


Charles Carlson

Editor, DRIP Investor

Equifax (EFX), a leading provider of credit-related data and services, posted better-than-expected results, observes dividend reinvestment expert Chuck Carlson, editor of DRIP Investor.

Revenue in the fourth quarter rose 8% to $905.8 million, beating the consensus analysts’ estimate of $896.2 million. Adjusted earnings per share of $1.53 beat the estimate of $1.49.

The company’s Workforce Solutions unit led the way with 22% revenue growth. Verification services — the company is a leading provider of employment and income verification services — rose 33%.

This business, which carries high profit margins, benefited from mortgage market inquiries and expansion of the company’s data records. Equifax is confident that the operating momentum will continue in 2020.

You may recall that Equifax experienced a massive data breach in September 2017; the firm has been spending aggressively to improve its systems security and data protection.

Equifax was the best-performing stock in our Editor’s Portfolio in 2019, rising 52%. The rebound in 2019 was especially impressive in light of the data breach and the ensuing fallout against the company.

Several of the company’s business units are benefiting from a strong mortgage and refinancing market. The firm is expecting the U.S. mortgage market to be about fl at in 2020, but there could be some upside here if rates continue to trend lower.

The market clearly likes what it sees in the company’s income and employment verification business and the opportunities here. I have owned these shares since the 1990s and have been pleased with their long-term returns. It appears the worst is behind the company in terms of ramifications and costs from the data breach, which should help build investor support for the stock.

While I don’t expect another 52% gain in 2020, the stock should beat the broad market over the next 12 months. Please note that Equifax offers a direct-purchase plan whereby any investor may buy the first share and every share directly from the company. Minimum initial investment is $500.

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