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Experian - strong Q3 despite tight lending conditions

Experian reported third-quarter organic revenue growth of 6%, ignoring exchange rates.

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Experian reported third-quarter organic revenue growth of 6%, ignoring exchange rates. Growth was ahead of expectations and broad-based across geographies, with Latin America the standout. Demand for Consumer Services was strong, with growth in the free member base. Business-to-business sales were up but continue to be impacted by tight lending conditions in the US and the UK.

Guidance for the full year points to organic revenue growth of 5-6% (previous guidance of 4-6%) and a slight uptick in margins.

The shares rose 2.0% in early trading.

View the latest Experian share price and how to deal

Our view

Experian is a global information services company specialising in data analytics, credit reporting, and identity verification.

Third-quarter trading was a touch ahead of expectations, and guidance got a tiny improvement as a result, but things are generally ticking along as expected. That's a testament to Experian's broad range of products, which should hold it in good stead in various environments.

Lending criteria remain tight in the US and UK, impacting demand from businesses looking to assess the creditworthiness of borrowers. But if the US can pull off a soft landing as is somewhat expected, we'd expect to see those conditions ease.

We've been pleasantly surprised by the extent of the success of the Consumer business. This division was given some real TLC recently, and that work has paid off. As people become more financially knowledgeable, with education around personal finance becoming more mainstream, Experian's primed to benefit.

Longer term, as the world continues to digitise, we think the data-led solutions that Experian can offer businesses and consumers will likely keep increasing in demand. Plus, identity, credit and fraud checks are hardly something businesses can ditch altogether, making Experian's product demand more resilient.

There are further opportunities as new technologies take hold, too. Latin America is seeing impressive growth as Experian looks to capitalise on a region that's undergoing significant upgrades to its financial services sector. The consumer services business now addresses half the adult population.

AI (Artificial Intelligence) is the topic of the moment. The key to generating true value from AI is having unique data for it to learn from, and that's something Experian has a treasure trove of. AI is already being integrated into products, and we see plenty of opportunities to leverage this technology to add value.

Cash generation remains strong, and the balance sheet's looking healthy, too, with net debt relative to underlying cash profit below the target range. That gives scope to weather potential storms and supports dividend payments and the ongoing share buyback. Of course, no returns are guaranteed.

We continue to support Experian's range of products and the evolving importance of data in the modern world. With a long-term view, there's a lot to like. There are still some clouds overhead, but conditions in key markets look to be improving. That's somewhat reflected in the valuation, which has improved in recent months and now sits ahead of its longer-term average. There's pressure to deliver.

Experian key facts

All ratios are sourced from Refinitiv. 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 Refinitiv. 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. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.

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Written by
Matt Britzman
Equity Analyst

Matt is an Equity Analyst on the share research team, providing up-to-date research and analysis on individual companies and wider sectors.

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Article history
Published: 16th January 2024