Company Reports

Wide-moat-rated TransUnion’s results were decent, and we attribute the positive stock reaction to overly negative sentiment heading into earnings. Organic constant-currency revenue growth was 8.3% in the first quarter of 2024, ahead of the firm’s guidance of 3%-4% and the 5.4% of the fourth quarter. TransUnion’s stock dropped after Equifax reported last week, even though much of Equifax’s disappointment came from its workforce solutions segment. Adjusted EBITDA margins of 35.1%, were up from 34.3% in the year-ago period and were healthy in our view. TransUnion raised its 2024 revenue and earnings outlook. Our 2024 estimates were previously ahead of the firm’s outlook but are now within their updated ranges. We will maintain our $100 fair value estimate for TransUnion and regard shares as undervalued.

All three credit bureaus—Equifax, Experian, TransUnion—and Fair Isaac have exposure to mortgage volumes, and in recent years, these volumes have proved difficult to forecast. Equifax's 2023 mortgage inquiries were 60% below 2020 levels and 41% below 2019 levels. But it is not just mortgage volumes that are affecting these firms. Regulatory changes at government agencies and outsize pricing increases can be important profit drivers. We see the transition to an optional bi-merge—a credit report with data from just two bureaus rather than all three—for government-conforming mortgages posing the most risk to Fair Isaac, as it does not have the upside that the credit bureaus get from the inclusion of VantageScore, a credit score developed jointly by the three major bureaus. But Fair Isaac also has the greatest upside to differing mortgage scenarios, as it has the highest incremental margins and the most pricing upside.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

TransUnion reported a fourth quarter and 2024 outlook that show trends are stabilizing across its businesses. We will maintain our wide moat rating and $92 fair value estimate on TransUnion’s shares. We regard shares as undervalued and at current valuations believe TransUnion has more upside than its peers Equifax and Experian.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

Wide-moat TransUnion reported disappointing third-quarter results as well as a disappointing fourth-quarter outlook. Third-quarter revenue, adjusted EBITDA, and adjusted EPS were respectively 2%, 3%, and 4% below the FactSet consensus estimates. TransUnion saw a really weak September and meaningfully took down its full-year outlook as a result. Making matters worse, it took a write-down of goodwill from its U.K. business (Callcredit) amid a challenging economy and regulatory environment there. A key debate, in our view, is if the firm is taking a big bath and thus resetting expectations, which sets up the stock favorably, or if a worsening macroeconomic environment with student loan payments resuming and interest rates spiking will result in further revenue misses. We take the former view. We expect to reduce our fair value estimate by about 10%, but we view the shares, trading at a five-year low, as cheap and offering a positive risk/reward profile.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

TransUnion reported a decent second quarter. Revenue grew 3% on an organic constant currency basis to $968 million, which beat the firm’s outlook of $948 million-$958 million and the FactSet consensus of $958 million. Likewise, adjusted EBITDA of $339 million and adjusted EPS of $0.86 edged out the consensus estimates of $335 million and $0.83, respectively. Despite the strong quarter, TransUnion maintained its 2023 outlook, which we attribute to the uncertain macroeconomic environment, weakening mortgage outlook, and perhaps conservativism as the stock has previously suffered when the firm modestly missed guidance. Overall, we will maintain our fair value estimate of $101 and wide moat rating on TransUnion’s shares.

TransUnion started 2023 with solid footing. Revenue of $940 million and adjusted EPS of $0.80 edged out the FactSet consensus estimates of $914 million and $0.74, respectively. While first-quarter results beat the firm’s guidance, TransUnion maintained its full-year 2023 revenue and adjusted EBITDA guidance. We attribute this to the uncertain macroeconomic environment and management taking a conservative stance given that the stock suffered with modest guidance misses last year. We will maintain our $101 fair value estimate on wide-moat-rated TransUnion and regard shares as undervalued.

Ahead of the firm’s release of first-quarter financial results, we are increasing our fair value estimate on wide-moat-rated TransUnion to $101 from $99 per share. We are increasing our long-term revenue expectations for the firm’s international segment as we believe increased credit utilization and economic growth in emerging markets support a brighter outlook. These changes are partially offset by raising our cost of equity assumption to 8.0% from 7.5% to account for a higher cost of equity in emerging markets. Though we believe TransUnion has only modest sensitivity to the economic cycle, we are increasing the Morningstar Uncertainty Rating to High from Medium as the firm’s net leverage ratio, which was 3.8 times at the end of 2022, is elevated.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

Wide-moat TransUnion finished 2022 with a fourth quarter that was a bit soft. Revenue and adjusted earnings came in modestly below the firm’s midpoint guidance and consensus expectations, but the firm’s initial 2023 operating outlook was mostly in line with consensus expectations. As we update our model, we do not expect to materially change our fair value estimate of $98 per share on TransUnion’s shares and regard shares as undervalued. We believe that the market is overly concerned about a recession and believe recession risk is adequately priced in. We believe that TransUnion’s business model has many positive attributes, that some recent weakness is more idiosyncratic rather than macro-related, and that even in a recession TransUnion can produce organic constant currency revenue growth.

TransUnion reported an okay third quarter. Revenue grew 1% on organic constant currency basis or 5% excluding mortgage. Revenue of $938 million missed the FactSet consensus by about 1% while adjusted EBITDA was roughly in line with consensus. We will maintain our $98 fair value estimate and view shares of wide-moat-rated TransUnion as attractive.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

Along with Equifax and Experian, TransUnion is one the Big Three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the past several years.

TransUnion reported a messy second quarter. While 5% organic constant currency revenue growth might not seem bad given the uncertain economic environment, the $948 million in revenue the firm reported in the quarter fell below its guidance range of $958 million-$968 million, a rare miss. In addition, the firm lowered its back half of 2022 revenue target by $85 million and not just because of mortgage or foreign exchange headwinds. We are maintaining our wide moat rating but expect to lower our $115 fair value estimate in the 5%-15% range. In the credit bureau space, we continue to prefer Equifax as we believe its income and employment verification is differentiated with multiple secular growth drivers.

Along with Experian and Equifax, TransUnion is one the big three consumer credit bureaus. Given the fixed costs inherent in a data-intensive business, TransUnion has been able to generate meaningful margin expansion over the last several years.

In our view, wide-moat-rated TransUnion reported solid first-quarter results. Revenue grew 8% organically to $921 million and beat the FactSet consensus estimate by $10 million. Adjusted EBITDA of $334 million and adjusted EPS of $0.93 was virtually in line with consensus. TransUnion slightly increased its revenue guidance and slightly reduced its margin and adjusted EPS guidance, but the changes to its guidance were very modest in our view. Overall, there was little in the firm’s earnings release that would alter our long-term view of TransUnion, and we will maintain our fair value estimate of $115 on TransUnion’s shares. We regard its shares as undervalued.