ii view: credit to Experian whose share price recovery continues

Shares for this FTSE 100 company are down by over a fifth in 2022, but are up 18% since June. Buy, sell, or hold?

First-quarter trading to 30 June

• Organic revenue up 8%
• Reiterated full year revenue guidance

Chief executive Brian Cassin said:

"We grew strongly in Q1, in line with our expectations, underpinned by our portfolio diversity and growth initiatives.”

ii round-up:

Global information services company Experian (LSE:EXPN) today delivered revenue growth at the upper end of City expectations as demand for credit information remained robust. 

Organic revenues, stripping out acquisitions, rose 8% for the three months to end of June, down from the 9% reported in the prior fourth quarter, but exceeding analyst forecasts nearer to 7%. 

Experian shares rose by more than 3% in UK trading having fallen by around a quarter year-to-date coming into this latest announcement. Shares for US rival Equifax (NYSE:EFX) are down by more than a third in 2022 so far, while the FTSE All World index has fallen by just over a fifth.

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Experian’s data helps consumers buy cars and houses and assists companies in offering credit prudently.

The FTSE 100 company reiterated its expectation for full-year organic revenue growth of 7-9%, down from 12% achieved during 2021. Total revenue growth is expected come in at between 8% and 10%, combined with a modest gain in the profit margin. 

Organic revenue growth for its biggest geographical region North America, accounting for 65% of overall sales, rose 7%, helped by good demand for data analytics and fraud and identity management. 

Latin America led the way during the quarter with organic revenue growth of 18%, aided by sales growth of 42% for its consumer services business. Free consumer credit score memberships in Brazil rose by 2 million from the previous quarter to hit 73 million. Free data from consumers is often then analysed and later sold to business customers.  

Latin America vies with its UK and Irish business for second and third places in geographical term, with each generating overall group sales of just under 15%. 

First-half results are scheduled for 16 November.

ii view:

Experian’s Business-to-Business activities help corporations provide better customer experiences by managing and analysing data that will help them solve problems, drive better decisions and outcomes, and prevent fraud. Its Consumer Services business aids millions of people in countries such as the USA, the UK and Brazil better manage and improve their financial position and helps them to protect against fraud and identity theft. 

For investors, rising interest rates are more likely to see consumers attempting to repay debt rather than applying for new loans. Elevated inflation and a cost-of-living crisis add to consumer desire to reduce borrowings, while an estimated one-year price/earnings (PE) ratio above the 10-year average also suggests the shares are not necessarily cheap. 

More favourably, still relatively low rates of unemployment in many of its key markets should help underpin demand for credit. Growth in data generally looks to offer ongoing opportunity, while bolt-on acquisitions continue to be made with its sizeable Brazilian business previously added to. 

In all, and while some caution looks sensible given an uncertain economic outlook, the increasing value of data looks to provide reason for continued investor support over the long term.

Positives: 

• Company enjoys both product and geographical diversity
• Growing free consumer memberships

Negatives:

• Economic outlook uncertainty
• Subject to currency movements

The average rating of stock market analysts:

Buy