Key Points
Equifax exceeded expectations in Q3.
The mortgage market is weakening, forcing Equifax to lower revenue forecasts -- but not by much.
Equifax (NYSE:EFX) stock, owner of one of the nation's three major consumer credit reporting agencies, exploded 11.5% higher through 11:25 a.m. ET Tuesday after beating earnings this morning.
Analysts had forecast Equifax to earn $2.20 per share, adjusted for one-time items, on $1.69 billion in Q3 sales. In fact, Equifax earned $2.26 per share (adjusted) on sales that met expectations.
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Equifax Q3 earnings
Equifax grew its revenue 10% in the third quarter, boosted especially by its U.S. mortgage segment, where revenue grew 15%, and its talent solutions (employee background checks) business, where sales soared 20%. Net income surged ahead 32%, and GAAP earnings per share rose 39%.
GAAP profit didn't quite reach the high levels noted for adjusted profit. Still, those fully-diluted GAAP earnings per share were $1.79, a significant improvement over Q3 2025.
What's next for Equifax stock
Turning to guidance, Equifax warned that high interest rates are dampening mortgage demand, impacting its revenue in that crucial segment, and forcing it to cut its full-year revenue guidance. At the midpoint, management projects revenue of about $6.66 billion this year -- which is still a respectable 9.6% growth rate and not that much worse than Q3's result.
Adjusted earnings per share should be about $8.50 this year, which works out to a valuation of about 21.5 times current-year earnings. Similarly, free cash flow so far this year is $763 million -- about 33% ahead of reported net income. If Equifax can maintain this pace, it might close out the year with more than $1 billion in FCF, and a price-to-free cash flow ratio also of 21x.
At a long-term earnings growth rate projected at 12%, that seems a bit expensive to me. I won't be chasing today's rally to buy Equifax stock.
Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Equifax. The Motley Fool has a disclosure policy.