Experian Earnings: Quarter Modestly Slower but in Line With Expectations

Wide-moat Experian EXPN reported 5% organic revenue growth in the firm’s fiscal first quarter, a downtick from 8% in the prior quarter as lending tightens. Overall, there was little in the firm’s trading update that would alter our long-term view of the firm and we will maintain our fair value estimate of GBX 3,300. We regard shares as modestly undervalued and continue to believe that Experian’s peers TransUnion and Equifax offer a more compelling opportunity to investors.

North America revenues were up 4% organically. Credit bureau revenues (excluding mortgage) were up just 2% as banks cut back on lending. Auto revenues, which includes Experian’s AutoCheck service, continue to hold up with 8% organic revenue. We note that less than half of Experian’s auto revenue is tied to lending with the other half including data and analytical services. Banks tightening credit and cutting back on marketing was also felt in consumer services where revenues grew just 3% versus 11% in the prior quarter with the marketplace business (such as Experian Boost) dragging growth. Based on data from the Saint Louis Federal Reserve, the percentage of banks tightening standards for credit cards and auto loans continues to increase. Latin America continues to be a strong source of growth for the firm with 13% organic revenue growth. UK and Ireland continue to be soft while the EMEA and Asia Pacific business improved to 8% growth. EMEA and Asia Pacific saw broad-based strength but with this geography only 6% of the firm’s revenue, its strength has limited impact on the firm overall. For fiscal 2024, Experian maintained its outlook of 4%-6% organic revenue growth, which feels reasonable to us.