Why Equifax Stock Popped After Earnings

Equifax, one of the three major consumer credit reporting agencies, experienced a 11.5% increase in its stock price after reporting better-than-expected earnings for Q3. Analysts had predicted earnings of $2.20 per share, adjusted for one-time items, on $1.69 billion in sales. However, Equifax reported earnings of $2.26 per share (adjusted) on sales that met expectations.

The company's revenue grew by 10% in the third quarter, driven by its U.S. mortgage segment (up 15%) and talent solutions (employee background checks) business (up 20%). Net income surged by 32%, and GAAP earnings per share rose by 39%, reaching $1.79, a significant improvement over Q3 2025. Despite this strong performance, Equifax warned that high interest rates are dampening mortgage demand, impacting its revenue in that segment and leading to a cut in full-year revenue guidance.

Management now projects revenue of about $6.66 billion for the year, a respectable 9.6% growth rate. Adjusted earnings per share for the year are expected to be around $8.50, resulting in a valuation of approximately 21.5 times current-year earnings. Free cash flow so far this year stands at $763 million, which is about 33% higher than the reported net income.

If Equifax can maintain this pace, it may close out the year with more than $1 billion in free cash flow, leading to a price-to-free cash flow ratio of 21x. However, considering a projected long-term earnings growth rate of 12%, some may find the valuation a bit high. The author does not recommend rushing to buy Equifax stock following today's rally.