Equifax Executing Well With Strong Underlying Trends but Mortgage and Currency Headwinds Intensify

Equifax reported a solid second quarter with 4% constant currency revenue growth as strong nonmortgage revenue growth was more than enough to offset the 33% decline in mortgage credit inquiries seen during the quarter. We view Workforce Solutions'; ability to significantly outgrow the mortgage market as well as post 30% organic growth in the nonmortgage business as strong evidence the segment’s intangible assets allow it to garner pricing power and higher penetration in the marketplace. As we tweak our model to reflect higher foreign exchange headwinds and slightly lower mortgage activity than we previously forecast, we are reducing our fair value estimate by 2% to $320 and regard shares of wide moat Equifax as meaningfully undervalued. We expect revenue to grow on average at 10% over the next five years, which is higher than consensus, as we believe the firm's fastest-growing workforce solutions segment will grow faster and longer than the market expects.