ii view: Experian surprises market in Q3

Covid has hurt but will the rollout of vaccines inject further confidence into consumers?

Third-quarter trading update to the end of December

• Organic revenue up 7%
• Total currency adjusted revenue up 10%

Guidance:

• Expects fourth-quarter organic revenue growth of between 3% to 5%
• Expects full-year adjusted earnings of between $1.36 billion and $1.38 billion

Chief executive Brian Cassin said:

"Our performance in Q3 was better than we expected. We delivered organic revenue growth of 7% and total revenue growth of 10% at constant exchange rates.

"Experian is performing very well, even in the exceptional circumstances created by the pandemic, and we expect to deliver a strong performance for this financial year. This again illustrates the resilience of our business. We remain highly focused on investing to sustain this performance and to take full advantage of the recovery when it comes.”

ii round-up:

Experian (LSE:EXPN) describes itself as “the world's leading global information services company.” It looks to help individuals access financial services and businesses to make smarter decisions. 

Its data can help with the buying of a car or a house, help companies to offer credit prudently or assist in preventing identity fraud and crime. 

For a round-up of this latest trading update, please click here.

ii view:

Experian sells data to credit-granting institutions, individuals and other users, along with analytical tools and marketing data. It employs over 17,000 staff across 45 countries. Geographically, North America generates its largest slug of sales at around 63%. Next comes the UK and Ireland at around 15%. Then Latin America at 14%, with Asia and the rest of the world making up the balance. It recently took a foothold in Germany, acquiring a majority stake in the nation’s second largest credit bureau.

For investors, the pandemic and 2020 have underlined Experian’s economic susceptibility. Consumers are unlikely to want to take on credit and make big ticket purchases if their jobs could be lost. An estimated one-year price/earnings ratio (PE) in the mid-30s is also comfortably above the three- and 10-year averages, suggesting the shares are not obviously cheap. 

But the growth in data generally looks to offer ongoing opportunity, and a restructuring programme at its UK and Irish business remains ongoing. Its global consumer membership base has also passed 100 million to 103 million, up 20 million year-to-date. In all, while some near-term caution looks sensible given pending tough comparatives from US mortgage related business, this latest update has done nothing to undermine ongoing long-term optimism.  

Positives: 

• Company enjoys both product and geographical diversity
• Six years of consecutive dividend growth

Negatives:

• Asia/EMEA organic revenue fell 11%
• First quarter organic revenue declined due to Covid-19

The average rating of stock market analysts:

Buy