Equifax (NYSE: EFX) Surges To All Time Highs, But The Best Is Yet To Come

With 2017’s infamous data breach fast becoming a distant memory, shares of Equifax (NYSE: EFX) powered to all-time highs this week after surprising Wall Street with fresh guidance. In what was a fresh boost of momentum to the stock which was starting to run out of steam after a solid run in November, shares are now up 75% since March and 30% in the past four weeks.

As part of an investor presentation on Tuesday, the credit reporting agency shared their expectations for Q4 2020 EPS of $1.75-$1.85 (vs. $1.72 consensus) and 2021 adjusted EPS of ~$7.15 vs. the consensus of $6.48. Next year’s revenue growth is expected to be around 6%, an impressive three times higher than the forecasted 2% Wall Street was expecting.

For investors, it means there’s going to be plenty of number crunching done this side of the holidays as investors reconsider their opinions given how attractive shares have just become. It’s reasonable to expect a strong bid to continue to flow into 2021 as Equifax ends 2020 in a stronger position than it might have expected.

Fresh Upgrades

Already we’ve seen the likes of Barclays come out with an upgrade to shares, pushing them up to Overweight, with Evercore ISI analyst David Togut also bullish on the stock. He noted how this week’s update from management reflects improved performance from Equifax’s Workforce Solutions unit, "fueled by increasing Work Number records, products and penetration, and mortgage, benefiting from low interest rate environment in early December."

It’s a far cry from the 40% drop seen in the stock price back in September 2017, when the company first reported the massive data breach that exposed the credit details of 140 million Americans. They’ve managed to successfully put that behind them though, with Andrew Jeffrey from Truist noting how they have “regained USIS share, improved mortgage offerings and extended EWS competitive advantage.”

Getting Involved

Indeed, for investors considering starting a position on the back of this update, there are plenty of reasons to think about getting involved before next month’s earnings report. Their last two earnings reports have come in well ahead of the consensus and Wall Street will be expecting the same this time, even after this week’s update.

In October, Equifax generated more than $1 billion in quarterly revenue for the first time. That report also had EPS 58% higher than what analysts had forecasted while in July it was 30% higher. Both reports had year on year revenue growing by double digit percentages so there’s a ton of internal momentum ticking away for investors to be excited about.

The company has been making solid headway with innovations into cloud data and technology which are helping to drive margin expansion, the effects of which we’re already starting to see in this week’s increased guidance. With Tuesday’s jump, the stock’s MACD indicator has had a bullish crossover while shares are trading just below the 70 level on their RSI, suggesting they’re hot but not too hot.

It mightn’t have the flash that tech companies do but in many ways this is a strength as it means they can fly under the radar and offer solid buying opportunities. Wall Street was caught underestimating them this week, you can be sure they won’t want that to happen again.