TransUnion Earnings: Solid Quarter and Intact Outlook

TransUnion TRU 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.

TransUnion’s first-quarter revenue increased 2% on an organic constant currency basis. U.S. markets (B2B) revenue was flat organically. Financial services revenue declined 1% as growth in auto offset weakness in consumer lending and mortgage while emerging verticals grew 1%. We don’t expect the recent banking turmoil to have much direct impact on TransUnion, and we note that TransUnion’s financial services customer base is skewed to larger financial institutions. U.S. consumer interactive revenue declined 5%. As TransUnion laps contract negotiations and sees growth in the indirect channels and at Sontiq, we expect the rate of decline to moderate. International continues to be a bright spot with 12% constant currency revenue growth, consistent with the level we saw in the prior quarter with particular strength in emerging markets such as India, which grew 33% constant currency in the quarter.

While TransUnion kept its full-year 2023 revenue and adjusted EBITDA guidance, it did raise its adjusted EPS outlook by $0.03 at the midpoint driven by lower interest expense from debt repayment and lower forward interest rates.