Equifax Inc. Earnings Cheat Sheet: Strong Margins Continue, but Net Income Falls

S&P 500 (NYSE:SPY) component Equifax Inc. (NYSE:EFX) reported its results for the third quarter. Equifax provides information solutions, employment and income verification, and human resources business process outsourcing services.

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Equifax Earnings Cheat Sheet for the Third Quarter

Results: Net income for the credit services company fell to $66.7 million (54 cents per share) vs. $76.5 million (61 cents per share) a year earlier. This is a decline of 12.8% from the year earlier quarter.

Revenue: Rose 3.5% to $490.4 million from the year earlier quarter.

Actual vs. Wall St. Expectations: EFX reported adjusted net income of 65 cents a share. By that measure, it beat the mean analyst estimate of 64 cents per share. Analysts were expecting revenue of $487.9 million.

Quoting Management: “The strong performance we delivered in the third quarter is a direct reflection on the effectiveness of our business strategy and our ability to execute. For the quarter, we grew revenue at double digit rates in our International (excluding Brazil), North America Personal Solutions, and North America Commercial Solutions businesses and at solid single digit rates in USCIS and TALX despite lower year-over-year activity in the mortgage market,” said Richard F. Smith, Equifax’s Chairman and Chief Executive Officer. “As we look to the future, the fundamentals of our business are strong, and I expect the performance we have delivered this year, including our outlook for the fourth quarter, to position us very well in 2012.”

Key Stats:

Last quarter marked the fifth consecutive quarter of gross margins expanding as the company’s gross margin expanded 1.2 percentage points to 61.4% from the year earlier quarter. Over that span, margins have grown on average 1.9 percentage points per quarter on a year-over-year basis.

Revenue has risen the past four quarters. Revenue increased 5.7% to $487.1 million in the second quarter. The figure rose 2.4% in the first quarter from the year earlier and climbed 3.8% in the fourth quarter of the last fiscal year from the year-ago quarter.

The company has now seen net income fall in each of the last two quarters. In the second quarter, net income fell 51.6% from the year earlier quarter.

Looking Forward: Analysts appear increasingly negative about the company’s results for the next quarter. The average estimate for the fourth quarter has moved down from 67 cents a share to 66 cents over the last seven days. The average estimate for the fiscal year has seen a bump from $2.48 per share sixty days ago to $2.49.

Competitors to Watch: Moody’s Corporation (NYSE:MCO), The Dun & Bradstreet Corp. (NYSE:DNB), Paychex, Inc. (NASDAQ:PAYX), McGraw-Hill (NYSE:MHP), and Automatic Data Processing (NASDAQ:ADP).

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(Source: Xignite Financials)