Experian reported third-quarter organic revenue growth of 8% (7.7% expected), excluding currency impacts. Growth was driven by North America, though all regions and channels contributed positively.
Following the raise back in November, full-year guidance was left unchanged. Revenue growth is expected at 11% (8% organic), and margins are on track to improve by 0.3-0.5 percentage points.
The shares fell 4.4% in early trading.
Our view
This was a good quarter for Experian, and the price reaction on the day felt a little harsh – perhaps a reflection of slightly higher expectations. But for longer-term investors, this was a continuation of consistent sales growth and a positive outlook.
Experian is a global information services company specialising in data analytics, credit reporting, and identity verification.
The US credit bureau market, dominated by Experian, Equifax, and TransUnion, forms the core of Experian's operations, where it connects borrowers with lenders. This market concentration provides pricing power, allowing cash from core operations to fuel growth in new areas.
The lending environment in the core North American region is still subdued, but some green shoots are emerging. Experian's broad range of products and services positions it well across various market conditions. The proof’s in the pudding, and strong, dependable top-line growth and margin expansion despite uncertain conditions are impressive.
The Consumer Services division differentiates Experian from peers and has shown impressive growth, driven by recent investments and strategic initiatives. It’s further bolstered by a significant rise in free members, over 208mn last we heard. With financial literacy becoming more widespread, Experian is well-positioned to capitalise on this trend, offering tools that empower consumers to manage their credit and financial health more effectively.
As the world continues to digitise, we think Experian's data-led solutions for businesses and consumers are likely to see increasing demand. Identity verification, credit assessments, and fraud prevention are critical services that businesses cannot easily forgo, adding a layer of resilience to revenue streams.
Latin America is a region where the group is looking to expand further. Its financial services sector is undergoing substantial upgrades, presenting some structural growth opportunities. But for now, economic challenges, especially in Brazil, are keeping growth on a leash.
Artificial Intelligence (AI) remains a focal point for innovation. Experian's vast and unique data sets provide a robust foundation for AI applications. Integration is already underway, and we see substantial potential for future advancements in this area.
Strong cash generation and a healthy balance sheet are attractive qualities. Net debt relative to underlying cash profit is below the target range, which helps support the ongoing dividend payments and share buybacks. Though there are no guarantees.
Experian's robust market position, strategic investments in technology, and diversified growth opportunities paint a positive long-term picture. The valuation looks attractive, and we see upside on offer. That said, sentiment has come under pressure as peers are upping their game, a key risk to monitor.
Environmental, Social and Governance (ESG) risk
The commercial services industry is low/medium risk in terms of ESG. Social and governance risks are the most acute - like product governance, data privacy & security, and labour relations - as exposure to environmental risks is minimal. Companies operating within facilities maintenance are also exposed to community relations and emissions risks.
Experian’s overall management of material ESG issues is strong.
A management committee is responsible for overseeing ESG issues, and ESG reporting now follows all leading reporting standards. A strong data privacy and security policy and cybersecurity programme are in place. However, major data breaches in 2015, 2020, and 2021 suggest more improvements could be made.
Experian key facts
All ratios are sourced from LSEG Datastream, based on previous day’s closing values. Please remember yields are variable and not a reliable indicator of future income. Keep in mind key figures shouldn’t be looked at on their own – it’s important to understand the big picture.
This article is original Hargreaves Lansdown content, published by Hargreaves Lansdown. It was correct as at the date of publication, and our views may have changed since then. Unless otherwise stated estimates, including prospective yields, are a consensus of analyst forecasts provided by LSEG. These estimates are not a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment.